Social Security benefits will rise
5.8 percent hike will start in Jan.
WASHINGTON - Social Security benefits for 50 million people will go up 5.8 percent next year, the largest increase in more than a quarter-century.
The increase, which will start in January, was announced yesterday by the Social Security Administration. It will mean an additional $63 per month for the average retiree.
It's the largest increase since a 7.4 percent jump in 1982, and is more than double the 2.3 percent rise that retirees got in their monthly checks starting in January of this year.
The typical retiree's monthly check will go from $1,090 to $1,153.
But the fatter Social Security check may still seem puny to millions of retirees battered this year by huge increases in energy and food costs. They have also watched as their retirement savings have been assaulted by the biggest upheavals on Wall Street in seven decades.
"Right now many senior citizens are feeling depressed because things seem out of control. They feel like they are in a boat being whipped around by rough seas," said Sung Won Sohn, an economics professor at the Smith School of Business at California State University. "Their purchasing power has been going down because of higher prices for food and energy and a lot of other things while their savings have taken a hit because of what is happening in the markets."
The market turbulence has continued this week with the Dow Jones industrial average plunging by 733 points on Wednesday, the second-largest point drop on record. Earlier this month, the Congressional Budget Office estimated that Americans' retirement plans have lost as much as $2 trillion over the last 15 months - more than 20 percent of their value - because of the market upheaval.
With all the gloomy news, retirees may take little comfort in the new cost of living adjustment. The benefit change is based on the amount the Consumer Price Index increases from July through September from one year to the next.
The increase would have been even higher, but after racing ahead earlier in the year, energy costs fell in August and September, helping to moderate the overall price gain.
The 5.8 percent rise in the cost of living adjustment is a sharp departure from recent years. The cost of living adjustment increases have been below 3 percent for all but three of the past 15 years as the Federal Reserve waged a successful campaign to keep inflation under control.
Even with the big increase, the cost-of-living adjustment is well below the gains of the late 1970s and early 1980s, when the country was in the grips of a decade-long bout of high inflation. The biggest cost of living benefit on record was a 14.3 percent increase in 1980.
Social Security benefits have been adjusted every year since 1975.
In one break for most retirees, the cost of living increase will not be eaten up by higher monthly premiums for the part of Medicare that pays for physician services.
Because of gains in the Medicare Part B trust fund, that premium will hold steady at $96.40 a month, although higher-income people including couples making more than $170,000 annually will see their premiums increase.
Next year's cost of living increase will go to more than 55 million Americans.
More than 50 million receive Social Security benefits while the rest get Supplemental Security Income payments for the poor.