Based on the increase in average wages, the maximum amount of earnings subject to the Social Security tax will increase from $80,400 to $84,900 in 2002.
As a result of that change, the maximum yearly Social Security tax paid by employees and employers will increase by $279 each. For self-employed workers, it will rise by $558. Of the approximately 154 million workers who pay Social Security taxes, only about 10.5 million are affected by the higher wage base in 2002, according to federal government estimates.
Also based on the increase in average wages, the amount of earnings required to earn a quarter of coverage will increase to $870 in 2002, up from $830 in 2001.
Increased benefits
Monthly Social Security and Supplemental Security Income (SSI) benefits to more than 50 million Americans will increase 2.6 percent in 2002.
"Inflation continues to be low, which is certainly good news for the elderly and disabled," Larry G. Massanari, acting commissioner of Social Security, said in announcing the increase. "Inflation is one of the biggest challenges for people living on a fixed income."
The 2.6 percent increase will begin with benefits that 45 million Social Security beneficiaries receive in January 2002. Increased payments to more than 6 million SSI beneficiaries will begin on Dec. 31, 2001.
For Social Security beneficiaries, the average monthly benefit amount for all retired workers will rise from $852 to $874. The maximum federal SSI monthly payment to an individual will rise from $531 to $545. For a couple, the maximum federal SSI payment will rise from $796 to $817.
Social Security and SSI benefits increase automatically each year based on the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year through the corresponding period of the next.
This year's increase in the CPI-W was 2.6 percent. Based on the increase in the CPI-W from the third quarter of 2000 through the third quarter of 2001, Social Security and SSI beneficiaries will receive a 2.6 percent COLA for 2002.
