The Cost of Living Adjustment, otherwise known as a COLA, scheduled to take effect in 2012, will result in a much-needed and long-anticipated pay increase to those receiving regular retirement, survivors, widows, disability, and SSI benefits through the Social Security Administration as well as government retirees.
The COLA Adjustment slated for 2012 was determined from the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CP-W) as it is compared to the CP-W from the third quarter of the previous years. This year’s COLA Adjustment of 3.6% is based on the CP-W data from 2008 through 2011. Basically, the more the standard for the cost of living rises, or the more inflation rises, the more potential there is for a COLA to adjust the payouts to government program beneficiaries on a fixed income.
In the previous two years, there were was no COLA for SSA program beneficiaries and government retirees, a disadvantage which was largely felt as the cost of living continued to rise, just not enough to warrant a COLA.
For those who are currently receiving SSI or retirement checks, this means an increase in income. Over 60 million people nationwide will be affected by the COLA – 8 million SSI recipients will begin to see the adjustment starting in December 2011, and about 55 million retirees on Social Security will see the adjustment take effect in January of 2012.
Although the COLA will mean more income for those receiving government assistance or retirement, taxpayers will see an increase in the maximum amount of their income which is subject to Social Security taxes in 2012.
Medicare premiums are also projected to increase next year, which will offset some of the advantage the COLA gives to those who will be receiving more benefits.
The COLA boost to seniors and disabled Americans is expected to alleviate some of the pressure they have felt due to the economic slump in the previous few years, reducing the spending power of their dollar while also decreasing the overall value of equity in their homes. As a result, the economy is expected to receive a boost in spending increases from this group of consumers.
Others, however, are saying that in spite of the good news of the COLA for 2012, it is simply not enough. Seniors and those with disabilities have been highly affected by the rising cost of healthcare, paying an average of 14.1% more out of pocket just last year, than in previous years.
In spite of the disadvantages, the COLA is a step in the right direction of assisting those who need it the most in these hard times – the elderly and those suffering from disabling conditions, whose resources are so much more limited than others who are able-bodied and working.