Social Security benefits to rise
2.7%...
But much of the increase to be absorbed by Medicare premiums
Oct. 19,
2004--WASHINGTON - More than 47 million
Americans receiving Social Security will get a 2.7 percent increase _ an
extra $25, on average _ in their monthly checks next year, but much of
the increase will be eaten up by higher Medicare premiums.
The Social Security
Administration announced the cost-of-living adjustment Tuesday, and the
increase will start showing up in checks in January.
The latest increase
was the largest since benefits rose by 3.5 percent in 2001. A 2.1
percent increase went into effect at the beginning of this year.
The annual cost of
living adjustment, or COLA, is based on the rise in the government's
Consumer Price Index from the July-September quarter of last year
through the third quarter of this year.
The $25 will mean
that the monthly check for the average Social Security retiree will rise
from $930 this year to $955 next year.
However, the average
retiree will see only a little over half of that increase because the
government announced last month that monthly Medicare premiums for
doctor visits are going up by $11.60 a month next year, a record in
dollar terms.
Under law, no Social
Security beneficiary will get lower benefits than that person is
currently getting even if the Social Security cost-of-living adjustment
does not cover the entire cost of the Medicare premium increase.
But advocates for
the elderly said that protection still means that millions of Social
Security beneficiaries at the low end of the benefit scale will see no
gain at all this year because the COLA increase will be eaten up by the
Medicare premium increase.
The 2.7 percent
benefit increase will mean that the average retired couple will see
their Social Security benefits rise from $1,532 a month currently to
$1,574 next year, a gain of $42 per month.
John Rother, policy
director at AARP, formerly the American Association of Retired Persons,
said retired people were not only getting hit by higher Medicare
premiums but also faced the prospect of soaring heating bills this
winter.
"That means that
many people will have no ability to keep up with inflation," Rother
said.
The cost of living
adjustments announced Tuesday will go to more than 52 million people.
That includes 47 million people receiving Social Security benefits; the
rest receive Supplemental Security Income payments that go to the poor.
The standard SSI
payment will go from $564 per month to $579 per month for an individual
and from $846 to $869 for a couple.
The average monthly
Social Security payment for disabled workers will increase from $871
currently to $895 next year.
In the closing days
of the presidential campaign, Democratic challenger Sen. John Kerry has
accused President Bush of planning a surprise second-term effort to
privatize Social Security, saying such a move would be a "disaster for
America's middle class." The Bush campaign has called the charge "flat
inaccurate."
Social Security will
face a funding shortfall beginning in 2018 as more baby boomers retire,
meaning the government's biggest benefit program will be paying out more
in benefit checks than it is collecting in payroll taxes from current
workers.
While Bush
campaigned in 2000 on a program to partially privatize Social Security
by giving younger workers the option of diverting some of their payroll
taxes into private investment accounts, he has never pushed the proposal
in Congress, in large part because of sizable transition costs that some
estimate will top $1 trillion.
Monthly Social
Security benefit checks have been adjusted automatically since 1975 to
protect retirees' income from erosion caused by rising inflation. The
largest one-year increase was a 14.3 percent jump in 1980, a period when
the country was battling double-digit inflation.
About 9.9 million
workers will have to pay higher payroll taxes next year because the
maximum amount of Social Security earnings subject to the payroll tax
will rise from $87,900 to $90,000. In all, an estimated 159 million
workers will pay Social Security taxes next year.
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