A 3.5 – 3.7 percent increase is expected in social security checks for 2012, benefiting nearly 50 million retired and disabled Americans.
The news isn’t all good however; the increase in checks is a result of an increased inflation rate.
According to the Associated Press, the government is expected to release an official inflation measure determining the COLA for 2012 on Wednesday. This release will confirm the raise in social security checks.
This marks the first raise since 2009; inflation has been too low in the past two years to allow for an increase in checks. The raise will ring in the 2012 New Year, beginning in January.
The increase in social security check amount is determined by the COLA, or the Cost-of-Living adjustment (COLA). The COLA was implemented in 1975 to reward social security users with small increases every year. 2010 and 2011 are the only two years the checks have not increased.
“After two years with no COLA and increasing costs for food, utilities and health care, every dollar of the modest average benefit of $14,000 is critical,” Tiffany Lundquist, spokeswoman for senior advocacy group AARP, said in a statement.
According to the American Institute for Economic Research, lack of increase in the past two years is due to lower inflation rates. The COLA can never become negative, which is exactly what it did in 2010 and 2011. In January 2010, the COLA sat at zero.
“The COLA is triggered only if the index surpasses the value it had the last time the COLA was positive,” according to the AIER website.
According to Social Security Online, the COLA for a social security individual is calculated based on the “primary insurance amount,” which is related to the beneficiary’s income. All of this is compiled to calculate the COLA determined for the individual.
According to Bloomberg Businessweek, wholesale prices have increased .8 percent in the U.S., which is higher than expected.
With holidays right around the corner, the inflation rise come at an inopportune time for gift shoppers.
England is also suffering; the country saw a record breaking rise in inflation today at 5.2 percent.
Critics predict that a high increase in inflation could wipe Obama’s chances of winning the re-election in 2012.