Social Security Beneficiaries Get Modest Increase
MARY DALE WALTERS
(RIVERWOODS, ILL., October 23, 2001) - Social Security beneficiaries in 2002 will see a modest increase in their monthly checks, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 2.6 percent will be applied to this coming year's benefits, starting with December 2001 benefits, which are paid in January 2002.
The 2.6-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $874 for all retired workers in 2002, $29 a month more than in 2001. A typical married couple, both receiving benefits, can expect to find $1,454 in their monthly benefit checks in 2002, $44 more than the comparable 2001 benefit, while the average widow or widower will receive an average benefit of $841, an increase of $30. The maximum monthly benefit payable to an individual retiring at age 65 in January 2002 will be $1,660, $124 more per month than a similar age-65 retiree in January 2001.
Gas, Electricity, Housing Costs Drive IncreaseThe increase is largely driven by an increase in service costs since last September, with the bulk of the increase arising from increased costs of natural gas, electricity and housing, according to Avram Sacks, JD, CCH Social Security analyst.
"The magnitude of the increase was fairly accurately forecast by the Social Security trustees last March," said Sacks. "At that time, they predicted a 2.8- percent increase, only two-tenths of a percent higher than the actual figure based on the rise of the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 2000 through the third quarter of 2001."
Earnings Limits Also RiseThe amounts that certain Social Security beneficiaries can earn without having their benefits reduced - "Retirement Test Exempt Amounts" in Social Security terminology - also will go up next year.
Workers under age 65 who are receiving benefits can earn up to $11,280 in 2002, or $940 per month, without having their benefits reduced. This is an increase of $600 annually over the 2001 limit.
A modified test applies to workers who reach age 65 in 2002. In the months before their 65th birthday, these individuals may earn up to $2,500 per month without having their benefits reduced. Once they reach age 65, benefits are no longer subject to any retirement test.
"This is a significant increase over the 2001 monthly limit of $2,084 for these workers," Sacks noted.
An "earnings test" for beneficiaries aged 65 through 69 was abolished by legislation in 2000. Beneficiaries age 70 and older have not been subject to benefit reductions based on earnings since 1983.
COLA Affects Many BenefitsThe Social Security COLA is applied to several types of benefits: retirement, disability, survivors - such as children and widow(er)s - and to the maximum family benefit, which is the maximum that can be paid if more than one family member is receiving benefits based on one wage earner's account.
It also affects what are known as "transitional" benefits - a special calculation applicable to those who reach ages 81 to 85 in 2002. It also applies to "special age 72" benefits, which are limited benefits paid to certain workers born prior to 1900 and their spouses or surviving spouses in cases where the worker is not credited with enough "quarters of coverage" to qualify as "fully insured," under the Social Security program, according to Sacks.