Social Security up $19 a month
WASHINGTON – More than 51 million Americans will get a 2.1 percent increase in their monthly Social Security checks next year – an extra $19 a month for an average retiree.
The Social Security Administration announced the cost-of-living adjustment on Thursday, reflecting the nation’s low inflation rate as measured by an index of consumer prices.
This year’s cost-of-living increase was 1.4 percent, or $13 a month for a typical retiree.
But most older Americans won’t get to pocket all of the increase. Monthly Medicare premiums also are rising, starting in January by 13.5 percent – $7.90 a month – to $66.60.
Social Security faces a funding shortfall projected to start in 2018. But despite proposals to reform the nation’s retirement system to make it more solvent, lawmakers are squeamish about touching the politically sensitive program while they’re seeking re-election.
To help shore up the system, the age at which workers can retire with full Social Security benefits has been gradually rising, along with the worker payroll taxes that fund current retirees’ benefits. Those who retire this year must be age 65 and two months to collect full benefits. Next year, the retirement age rises to 65 and four months. It will eventually reach 67 for workers born in 1960 and later.
Nine million workers will have to pay more in payroll taxes beginning next January, when the limit on taxable annual earnings will rise to $87,900 from $87,000. All told, about 156 million workers pay Social Security taxes.
Monthly benefit checks have been adjusted automatically since 1975 to protect retirees’ income from erosion caused by rising inflation. Benefits would be about 25 percent lower today had there been no cost-of-living adjustment – or COLA – each year, said Bill Novelli, executive director and chief executive of AARP, formerly the American Association of Retired Persons.
“The weak stock market and low fixed-income rates on one hand, and rapidly rising health care costs on the other, have reinforced the importance of Social Security in the last few years,” Novelli said.
Social Security is the main source of income for eight out of 10 retirees, AARP said.
“Low inflation is good for consumers, but without the annual COLA, even low inflation would erode the purchasing power of the millions of people who depend on Social Security income,” he said.
In 1980, for example, benefits jumped 14.3 percent, the largest annual COLA increase, reflecting double-digit inflation of that era. So far this year, inflation is running at an annual rate of 2.5 percent.
A retiree’s average monthly benefit will rise next year from $903 to $922. For the average couple receiving benefits, the monthly check will jump from $1,492 to $1,523, an increase of $31.
The average monthly benefit for disabled workers will rise from $844 to $862.
As a presidential candidate in 2000, George W. Bush campaigned on the idea of letting younger workers invest a portion of their payroll taxes in the stock market to help shore up future funding for the retirement system.
But Social Security has taken a back seat to the war on terrorism and even Medicare, which analysts say faces a greater funding crisis.
As medication costs soar, lawmakers in Congress have been working on a prescription drug benefit for the elderly that could mean higher-income seniors would pay more than other Medicare beneficiaries for their health coverage – a historic policy shift for a program that has always provided a standard benefit at a fixed price for every participant.
Republicans in particular want to inject competition into Medicare by inviting private insurers to compete for seniors’ health care dollars, arguing that would modernize the 38-year-old government program as well as hold down future government spending.
When Medicare began in 1967, premiums were set at $3 a month. Next year’s 13.5 percent increase is the third-largest ever. The level of increase is set by law requiring premiums to cover a fourth of the program’s cost.
On the Net:
Social Security Administration: http://www.socialsecurity.gov