Social Security COLA to Give Seniors Biggest Pay Raise Since 1982

2009 Social Security COLA will help seniors offset the high cost of gas and food

Starting in January 2009, retirees and other Social Security beneficiaries will receive their largest annual pay increase since 1982—a 5.8 percent cost-of-living adjustment (COLA) that will help boost the buying power of people who may be struggling to keep pace with the rising cost of gasoline, heating oil and food.

Social Security and Supplemental Security Income benefits increase automatically each year, based on the year-over-year growth in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. The annual Social Security COLA is intended to help offset the rising cost of consumer goods such as food and clothing.

Nearly 60 Million to Receive Larger Social Security Checks in 2009
Fifty million Social Security beneficiaries will see the 5.8 percent Social Security COLA for the first time on their monthly checks in January 2009. Increased payments to more than 7 million Supplemental Security Income beneficiaries—which includes people such as disabled workers and widowed parents with children—will begin on December 31, 2008.

The 2009 Social Security COLA of 5.8 percent is the largest annual increase in Social Security benefits since the 7.4 percent increase that beneficiaries received in 1982. Since then, the annual Social Security COLA has never been higher than 5.4 percent, which Social Security beneficiaries received in 1991.

Estimates as recently as September suggested that the annual Social Security COLA might exceed 6 percent, but when the final third-quarter CPI-W was tallied, it came up 5.8 percent.

Social Security Maximum Taxable Earnings Also Increase
Another change that takes place every January is the maximum amount of annual earnings that are subject to the Social Security tax, a figure that is based on average U.S. wages.

In January 2009, the maximum taxable earnings will increase from $102,000 to $106,800. Of the estimated 164 million workers who will pay Social Security taxes in 2009, about 11 million will have a higher tax bill as a result of the increase in the maximum taxable earnings.

Learn More About 2009 Changes to Social Security
For more information, see the Social Security Administration web site, which also includes a fact sheet that shows how the new changes will affect various beneficiaries and taxpayers.