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Social Security benefits to go up by 1.5 percent

WASHINGTON — Social Security benefits will rise 1.5 percent in January, giving millions of retired and disabled workers an average raise of $19 a month to keep up with the cost of living.

The increase is among the smallest since automatic adjustments were adopted in 1975, and reflects the fact that consumer prices have not gone up much in the past year. The annual cost-of-living adjustment is based on a government measure of inflation that was released Wednesday.

Automatic cost-of-living adjustments were adopted in 1975 so that benefits for people on fixed incomes would keep pace with rising prices. Some advocates for older Americans complain the adjustment sometimes falls short, especially for people with high medical costs.

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Michael Hartzog of Charleston, S.C., said the small cost-of-living adjustment will make it difficult to keep up with his wife's medical bills.

"We'll probably need to reduce our spending," he said. "I don't know exactly how."

Hartzog, 63, is retired after working 38 years at the Social Security Administration in South Carolina. He said his federal pension and Social Security benefits are affected by the cost-of-living adjustment.

The cost-of-living adjustment affects benefits for more than one-fifth of the country: nearly 58 million Social Security recipients, as well as benefits for millions of disabled veterans, federal retirees, and people who get Supplemental Security Income, the disability program for the poor.

Social Security pays retired workers an average of $1,272 a month. A 1.5 percent raise comes to about $19.

Benefits are based on lifetime earnings. The more you make, the higher your benefit — to a point. For someone who retired this year at age 66, the maximum monthly benefit is $2,533. That person will get a raise of about $40 a month.

The amount of wages subject to Social Security tax is also going up. Social Security is funded by a 12.4 percent tax on the first $113,700 in wages earned, with half paid by employers and the other half withheld from workers' pay.

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The wage threshold will increase to $117,000 next year, the Social Security Administration said. Wages above the threshold are not subject to Social Security taxes.

About 165 million workers pay Social Security taxes. About 10 million earn wages above the threshold, the agency said.

By law, the cost-of-living adjustment is based on the consumer price index for urban wage earners and clerical workers, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation, and education.

It is calculated by comparing prices in July, August, and September each year with prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up.

Since 1975, annual Social Security raises have averaged just over 4 percent. Next year will mark only the seventh time the adjustment has been less than 2 percent. This year's increase was 1.7 percent.