Social Security Increase Runs Short
The Social Security Administration announced a 4.1 percent cost of living adjustment for more than 52 million retired and disabled recipients last week. Checks will increase an average of $39 starting in January. This is the largest increase since the 5.4 percent advance in 1991. Last year’s increase was 2.7 percent.
Monthly checks have been automatically adjusted since 1975 based on the Bureau of Labor Statistics’ Consumer Price Index (CPI). The amount of the adjustment is based on changes between the third quarter of the previous year and the third quarter of the current year. The CPI produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. September’s 1.2 percent CPI increase was the largest hike in 25 years according to United Press International.
The CPI has seen a huge rise in energy costs. In January, Medicare premiums are expected to consume about 25 percent of this increase. Also those signing up for Medicare Part B will be paying a premium of about $32 starting in January.
Observations and reactions are mixed from those directly and indirectly affected by current cost-of-living increase.
“I’m elated,” said Tini Garza, executive director of La Voz del Anciano, an organization that assists older Hispanics in Dallas, Texas, said in the Dallas Morning News. “This is going to make a difference in people’s lives.”
“It is going to be a tough winter for many seniors," Mark Zandi, Economy.com's chief economist told the Ledger of Lakeland, Florida. "Not only will they face higher Medicare premiums, but record gasoline prices and higher home heating bills as well.”
“This is going to be a tough winter for a lot of people who are on fixed incomes. Making sure they can heat their homes is critically important,” cautioned Rebecca Stanfield, the director of Illinois Public Interest Research Group, speaking with the Chicago Tribune.
Increasing medical prices have the most pronounced effect on those on fixed incomes. The Dallas Morning News reported Michael Fleisher, executive director of the Dallas Jewish Family Service, said “These are the people who are at risk of facing an unexpected expense that will force them to choose between paying their rent and buying their groceries."
Those who depend on their Social Security checks for living expenses are having a hard time already.
“I’m drawing money of my savings to pay my bills, that can’t go on forever. What will I do if my health declines and I need that safety net?” Ms. Hodges asks in the Dallas Morning News.
An average retired couple, both on Social Security, will see their combined monthly check increase from $1,583 to $1,648. The average Social Security check will rise to $1,002 from $963 while the average monthly check for a disabled worker will increase $37 to $939.
The Social Security payroll tax earnings limit has also been raised from $90,000 to $94,200 starting in 2006 meaning that 11.3 million workers will pay more into Social Security in 2006 according to the Associated Press. In total, an expected 159 million workers will pay Social Security taxes next year.