Posted on 16 October 2012
By Mark Miller
The Social Security cost-of-living-adjustment (COLA) for 2013 will be 1.7 percent. The figure was announced this morning following the release of September’s Consumer Price Index.
To reach the yearly COLA adjustment the Social Security Administration averages together third-quarter inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
However, many seniors won’t even get that much because of the interplay of the COLA and premiums for Medicare Part B, which covers outpatient services. These two go hand in hand since the premium is deducted from most seniors’ benefits. We won’t know those figures until later this month.
The Social Security COLA also is applied to the maximum taxable earnings subject to payroll tax. In 2013, the maximum will be $113,700 — up from $110,100 this year.
And it also affects the retirement earnings test exempt amounts. This refers to the amount of income you can earn from work while receiving Social Security.
Once you hit your normal retirement age, you can earn an unlimited amount of income and receive Social Security benefits. However, if you file early, there’s a penalty on dollars earned over a certain amount. The 2013 ceiling will be $15,120 (Social Security defines “income” in this context as wages from employment, or net earnings from self-employment). If your earnings exceed the limit, $1 will be deducted from your benefit payments for every $2 you earn over that amount.
I’ll be writing more about this after the Part B premium is announced. UPDATE: The Medicare Part B premium was announced on November 16th; it will be $104.90– a 5 percent increase over 2012.
Click here to download a PDF of the Social Security Administration press release on the COLA, which contains other details.