The nation’s nearly 64 million Social Security recipients will get a 1.7% cost of living increase for 2015, while the maximum Social Security tax, which is linked to a different measure, will go up by just 1.3%, the government announced today.
The 1.7% boost means the average retired worker will see a $22 increase to $1,328 a month and the average senior couple will get a $36 boost to $2,176, the Social Security Administration said. The maximum monthly Social Security check for a single baby boomer claiming benefits in 2015 at the “full” retirement age of 66 will be $2,663, up from $2,642 in 2014. The increase will show up in regular Social Security checks in January and in payments made to 8 million beneficiaries of Supplemental Security Income (SSI) benefits on Dec. 31, 2014.
By law, since 1975, the Social Security COLA has been linked to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It is set each October based on the CPI-W for the 12 months ended September 30, which was announced by the Bureau of Labor Statistics this morning. While advocates for the elderly argue CPI-W understates the true increase in costs the elderly face, deficit hawks have pushed for linking COLAs to an even lower measure of inflation known as the chained CPI.
The 1.7% COLA is up a tad from 2014's 1.5% increase. Moreover, for the second year in a row, the Medicare Part B premiums withheld from retirees’ checks will remain unchanged at $104.90 a person per month. The additional Medicare Part B premiums charged to higher income seniors will also remain unchanged for the second year in a row. Those extra premiums start at $42 a month per person for singles with modified adjusted gross ranging from $85,000 to $129,000 and couples with MAGI from $170,000 to $258,0000 and top out at $230.80 per person a month for singles with income above $214,000 and couples above $428,000.
Workers can claim reduced Social Security retirement benefits at age 62, but lose some of those early benefits if they continue to work and earn above a certain amount. As part of today’s announcement, the Social Security Administration said that recipients who are age 62 through 65 in 2015 will be docked $1 in benefits for every $2 in earnings they have above $1,310 a month ($15,720 a year) up from $1,290 a month ($15,480 a year) in 2014. A worker who turns 66 in 2015 can earn up to $3,490 a month before his or her birthday, without losing benefits. Above that threshold, the worker will lose $1 in benefits for each $3 earned. Social Security recipients can earn as much as they like without being docked once they reach the full retirement age of 66.
Meanwhile, for 2015, the maximum amount of a worker’s pay subject to the Social Security tax (the so-called “wage base”), which is linked to the increase in average wages, not the CPI-W, will climb by just 1.3% to $118,500 from $117,000 in 2014. That means about 10 million high wage workers will see $7347 in Social Security taxes taken out of their paychecks in 2015, up $93 from 2014. In 2014, the wage base and the top tax rose by 2.9%, while in 2013 all workers faced Social Security tax sticker shock as Congress allowed a temporary cut in the employee’s Social Security tax rate ---from 6.2% to 4.2%---to expire. (The employer’s 6.2% share of Social Security tax was never cut.)
Employees and employers also pay 1.45% each in Medicare taxes on all wages, with no cap. In addition, as part of ObamaCare, wages and self-employment income above $250,000 for a couple or $200,000 for a single are subject to a 0.9% Medicare surcharge, which is paid on a household’s 1040 income tax return.
