Monday, October 16, 2006

Social Security doesn't follow the CPI?

I decided to hunt for the changes to the social security amounts today and was intrugued to see that the amount at which you stop paying social security (for an individual mind you) is at now at $94,200 whereas it was at $90,000 last year. Thats just over a 4.6% increase year over year. Also, the amount an individual must pay for 1 work credit went from $920 to $970. Thats a 5.4% increase. Why don't these things follow the Consumer price index(CPI), also known as the inflation rate? They are never that high. My two thoughts as to the reasons are:
1) It wasn't indexed previously and now they are making up ground.
2) Its a means to make up for the under-funded future of Social Security. The 4.6% is higher to get more money from the rich and the 5.4% is higher to pay less out in the long run....thus allowing SS to be funded longer.

Here is the referenced government article on SS rates.

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