The Social Security Administration recently announced a Cost of Living Adjustment (COLA) increase for 2012. What does this mean for the individuals who are currently receiving Social Security Disability benefits? It means that millions of these recipients will receive an increase in their benefits for the first time since 2009. The increase amounts to a 3.6% raise in monthly Social Security benefits, which is welcome news to Social Security Disability beneficiaries.

Breaking Down the Numbers

While the Social Security Administration has announced the 2012 COLA raise for Social Security recipients, the numbers aren't as exciting as anticipated. Most Social Security recipients will receive a 3.6 percent increase in their Social Security checks starting in January 2012. This amounts approximately $40 per month for the average Social Security Disability benefit recipient, or just over a $450 increase for the year.

Social Security recipients who also receive Supplemental Security Income SSI (a program for those who fall within or below the poverty level) will also see an increase in their SSI benefit payments. However, this increase will equate to just under $20 a month for most applicants – hardly even worth mentioning.

According to the Social Security Administration, one out of five US Social Security recipients in the United States will see a slight increase in their Cost of Living Adjustment. For most recipients, monthly Social Security payments offer approximately $1,000 a month, averaging out to $13,000 a year.

The Other Side of the COLA Increase

While Social Security recipients will receive slightly more each month due to the COLA increase, many will see that increase eaten up by an increase in Medicare Part B premiums. According to CMS (Centers for Medicare and Medicaid Services), Medicare recipients may see their Medicare Part B premiums increase by about $10 a month. This increase will naturally eat into the Cost of Living Adjustment that is being offered by the Social Security Administration.

While the Cost of Living Adjustment is certainly appreciated, the benefits of such may offset not only the increase in Medicare Part B premiums, but also tax increases on wages for the 2012 tax year. As of 2012, the Social Security Administration states the wage limit subject to Social Security payroll taxes plans an increase to $110,100.

Balancing Out

All in all, Social Security payments have increased approximately 58% since 2009, with increases or adjustments to Social Security payments based on inflation. Therefore, increases to annual payments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. Consumer prices are compared during the third quarter of each year with the third quarter of the previous year. That means if the price of consumer items increases on a yearly basis, the Social Security Administration also increases Cost of Living Adjustments to keep pace with such increases. However, if prices remain stagnant or even drop, as they have with the drooping economy, Social Security payments remain the same.

All in all, the COLA is expected to benefit approximately 55 million Social Security benefit recipients and approximately 8 million SSI recipients. Bottom line - many Social Security recipients, especially those who may be affected by the Medicare Part B premium increases, may find their Social Security "raise" leaves them with nearly the same monthly funds they received throughout 2011.

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Some individuals who are diagnosed with severe medical conditions and disabilities are eligible for the Social Security Compassionate Allowances program which includes a variety of Compassionate Allowances Listings that qualify for faster approval of disability benefits. The Social Security Administration provides government employees and Social Security recipients with a complete list of "approved" medical impairments that allow a Social Security Disability application to be eligible under the Compassionate Allowances guidelines.