The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Laborís Bureau of Labor Statistics.
Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.
Editor's note: An explanation by the American Institute for Economic Research of how the federal government determines the cost of living adjustment for seniors may be found here. Further savings, AIER says, were proposed by the Bowles-Simpson deficit reduction commission in 2010 and by President Obama in his proposed 2014 budget, using a consumer price index that would rise even more slowly than the one currently used.