Every year in October, the Social Security Administration (SSA) announces cost of living adjustments (COLA) that increase Supplemental Security Income (SSI) and Social Security Disability (SSDI/SSD) benefit entitlements. On October 16, 2012, the SSA reported a 1.7-percent COLA increase for the coming year.
As explained on the SSA website “a COLA increases a person’s Social Security retirement benefit by approximately the product of the COLA and the benefit amount.” The increases go into effect January 2013.
A complex formula determines the exact amount by which benefits will be increased. The specific Social Security benefit is based on a primary insurance amount (PIA). The PIA in turn directly relates to the primary beneficiary’s earnings through a benefit formula. The PIA increases by the COLA amount with the result truncated to the next lower dime. The SSA demonstrates the way this works as follows:
“If the initial PIA is $1,275.50 and it is increased by a 1.7-percent COLA, the new PIA would be $1,297.10 after truncation to the next lower dime.”
Those that retire before their normal retirement age will receive lower benefits than their PIA. On the other hand, those that retire after reaching the normal retirement age will receive benefits at a higher level than their PIA.
The new payments for SSI for 2012 are $710 for an individual and $1066 for a married couple who are both on SSI. The payments for persons on Social Security Disability Insurance benefits are based on the amount of Social Security taxes paid during their working years. The average benefit paid to a disabled worker, his spouse and children is $1,916 per month.