The Cost-of-Living Adjustment (COLA) for Social Security benefits will increase 1.5% in 2014. COLA began in 1975 in order to safeguard Social Security and Supplemental Security Income benefits from inflation and is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, calculated by the Bureau of Labor Statistics in the Department of Labor.
With this increase, two other inflation adjustments will be made. For those working, the maximum taxable earnings will increase to $117,000, which means amounts earned over $117,000 will incur the Social Security payroll tax. Secondly, for those working and receiving benefits before full retirement age, the earnings test exempt amount is increasing slightly. You may now earn $15,480 in wages before Social Security begins deducting benefit payments.