Social Security benefits will rise 1.7% next year for the nation's 58 million beneficiaries, or about $20 a month for the typical retired worker, the Social Security Administration said on Wednesday.
This cost-of-living adjustment for 2015 is slightly above the 1.5% increase for the current year.
The average retired worker who received $1,306 in Social Security benefits in 2014 will receive $1,328 a month starting in January 2015, according to the government's estimate.
Due to low inflation in recent years, annual increases have averaged 1.4% a year since 2010, less than half the 3% average per-year increase during the previous decade.
The maximum amount of earnings subject to the Social Security tax will be $118,500 in 2015, up from $117,000 this year. Taxes will increase for about 10 million of the 168 million workers who will pay Social Security taxes next year because of the boost in the taxable maximum, the SSA said.
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The annual COLA increase is tied to the Consumer Price Index, which is set by the Department of Labor's Bureau of Labor Statistics and measures the change in the price of food, housing, clothing, transportation, energy, medical care, recreation and education.
Groups representing senior citizens and many advisers said the increase is too small to account for today's actual living costs.
“There are specific things in the economy that go up way more than 1.7%,” said Nick Meriwether, chief financial adviser at Financial Planning Center. “That's nowhere near sufficient to maintain pace with what it costs to live in the economy now.”
Nursing care costs, assisted living and other health care expenses, for instance, all increase each year about twice the rate of next year's COLA, he said.
The low annual increase was predicted accurately by the Senior Citizens League earlier this month, as reported by
InvestmentNews contributing editor Mary Beth Franklin.
The COLA also is part of the formula used to set initial Social Security benefits, so even those who have turned 60 and haven't yet filed a claim are impacted by the annual adjustment increase.
