Senior citizens and other recipients of Social Security benefits will see their payments increase in 2012, according to a new government announcement. This 3.6 percent cost-of-living increase is the first granted for Social Security recipients since 2009.
Low Inflation Impacted Previous Years’ Social Security Payment Increases
Social Security recipients will receive a spike in their monthly checks after two consecutive years of failed Social Security increases. Over the last couple years, inflation was low due to economic struggles caused by the recession, resulting in beneficiaries losing their traditional 2-3 percent increases in both 2010 and 2011– the first time a cost-of-living increase was not approved in 30 years.
In 2009, beneficiaries received a higher than normal increase of 5.8 percent, but some say this doesn’t make up for the lack of increases in the years following the spike, due to Social Security’s vital role in keeping senior citizens afloat.
Nearly 60 million Americans receive benefits, with an average monthly check of $1,100. This year’s increase offers the average recipient an extra $39. With Social Security representing about 41 percent of elderly income, this amount could make a difference in paying a bill or purchasing a meal.
Medicare Premiums Likely to Eat Up Cost-of-Living Increases
Despite the fact that beneficiaries have been granted a Social Security increase, experts predict they won’t see the bulk of their extra money, due to expected hikes in medicare premiums which could eat up a portion of the raise. The increase in premiums– double-digit rate rise– should be announced next month.
Further down the line, some experts say workers will likely have to pay more into the Social Security program thanks to a higher inflation index. Additionally, workers can expect to receive smaller cost-of-living increases over time depending on the outcome of current debt reduction talks.
Lawmakers are looking into changing the way annual increases are formulated. If this pulls through, increases could lower by several tenths of a percentage point, a loss that adds up significantly over time.