It looks like there will be a Social Security cost of living adjustment, or COLA, in 2012 -- positive retirement planning news for many.
Bill McBride, a retired financial executive, blogs at CalculatedRiskBlog.com about economic trends. On Friday, he calculated the early line on Social Security COLAs and concluded that based on Friday's report from the Bureau of Labor Statistics saying that "The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.3 percent over the last 12 months," the Social Security COLA will be 3.5 percent in 2012.
McBride pointed out that Medicare premiums are also tied to this calculation and will rise as well, so some of that small retirement windfall is already spoken for.
He calculated that the contribution base cap is like to rise from $106,800 to somewhere around $110,000, although it's possible that if wages remain flat, there will be no increase, he said.
In a related post, he contemplated a switch to the chained Consumer Price Index, or CPI, from the CPI-W. The chained CPI is one of the most likely to be adopted in Social Security cost-saving scenarios. McBride said that if the government had adopted the chained CPI 10 years ago, Social Security benefits would be about 3.6 percent lower than they are now.
That doesn't sound terribly drastic, although it would certainly add to the pain for the 25 percent of recipients who are dependent solely on Social Security.