Social Security benefits to increase in January

Social Security benefits will increase 3.6 percent in January 2012, the U.S. government has announced.

The raise is the first cost of living increase in two years, Reuters reports.

According to Reuters:

Benefits are recalculated annually based on the rate of consumer inflation. Next year's increase will be the first since 2009 because consumer prices have remained relatively stable since then.

Fifty-five million Social Security recipients will benefit, Bloomberg Businessweek reports. Eight million blind and disabled Americans who receive checks from the Supplemental Security Income program will also receive the 3.6 percent increase.

"This is welcome news for seniors facing high prices for everyday items like gas, food and medicine," Senate Finance Committee Chairman Max Baucus, a Democrat, told Reuters.

Bloomberg Businessweek reports that the increase will boost the typical retired worker’s benefits by an additional $43 each month, increasing average monthly benefits to $1,229.

Wealthy Americans will chip in a little extra to fund the program, since the cap on the amount of income subject to the Social Security payroll tax is increasing to $110,100 from the current $106,800, Bloomberg Businessweek reports. About 10 million Americans will pay more into Social Security in 2012.

And seniors might not have extra money in their pockets for long. Forbes reports that, for many, the raise is likely to be eaten up by higher Medicare premiums, which the government will announce next month.