Social Security Benefits to Increase by 1.7% in 2013

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Inflation figures released for September show that there will be a small cost of living adjustment for Social Security benefits in 2013.

An increase of 1.7% for 2013 Social Security benefits was announced on Tuesday. The government based this percentage on the amount of inflation, which determines the rate of the cost of living adjustment (COLA) for the year. The increase will also be applied to the 8 million residents who receive Supplemental Security Income. In total, this increase will affect 56 million people, or about one fifth of the US population.

This adjustment will be the lowest increase since 1975, declining 52.7% from last year's increase of 3.6%. A lower inflation percentage is the result of the low increase in Social Security benefits. In 2010 and 2011, the government chose not issue a COLA at all - the only two times in the program's history that recipients' benefits were not increased to keep up with inflation.

The government's consumer price index ( CPI ) determines the official rate of inflation in the country. They noted that summer gas prices reaching a rate of $3.77 was a major inflation factor. Other major factors cited were outside energy and food prices.

The average Social Security beneficiary receives $1,237 a month, or about $14,800 a year. The low increase will have the biggest affect on seniors who rely on increases to pay for rising healthcare expenses.

This increase will cause 10 million of the 163 million workers who will pay into Social Security taxes in 2013 to pay higher taxes.

These inconsistent (and sometimes non-existent) COLA increases underscore the importance for Americans to find multiple income streams for retirement. At, our message remains to find and buy high-quality dividend stocks. The compounding returns and dividend income these stocks provide can be an excellent source of retirement income.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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Referenced Stocks: CPI

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