In 2015 Social Security benefits will rise by 1.7 percent per the annual cost of living adjustment (COLA), affecting more than 58 million beneficiaries. According to the Social Security Administration, monthly benefits for the average retired worker will increase from $1,306 to $1,328, while benefits for average retired couple will rise from $2,140 to $2,176.
Also in attempt to keep up with inflation, the SSA is increasing the maximum taxable earnings and earnings test exemptions. The maximum taxable earnings will rise from $117,000 to $118,500, and the earnings limits for retirees under the full retirement age of 66 will increase from $15,480 per year to $15,720 per year. For seniors who turn 66 in 2015, however—but who collect benefits before that birthday – the earnings limit will be $41,880.
2015′s COLA is a slight increase from 2014′s 1.5 percent but significantly lower than the 3.6 percent COLA in 2012. These fluctuations, which have been commonplace throughout the last 30 years – are due in large part to the oft-criticized way the SSA calculates the COLA each year. “The Social Security law requires annual adjustments based on the CPI, but that only looks at the third quarter of the year: the average for July, August and September,” said Jamie Hopkins, Associate Director of the New York Life Center for Retirement Income. “That might necessarily reflect spikes in prices, and if you look at COLAs from the mid-1980s until now, they all range somewhere between five and a half perfect and zero.”
More controversial is the SSA’s use of the CPI-W—the consumer price index for workers—as the basis for the COLA calculation. Critics of the current calculation point out that the CPI-W measures changes in the cost of living for workers, and that it doesn’t take into account many of the rising costs seniors disproportionately bear. “Computer prices have fallen, for instance, but for people collecting Social Security, those kinds of prices aren’t that important,” said Hopkins. Compared to wage earners, the elderly tend to spend more money on travel, prescription drugs and out-of-pocket medical bills and less on property taxes, fuel and food.