Social Security news both good and bad
Posted
Aug 24 2009, 02:13 PM
by
Karen Datko
Rating:
Here's a headline that's bound to get your attention: "Millions face shrinking Social Security checks." Or how about this one? "Social Security payments sans COLA puts millions at risk." What's going on here? Are seniors getting the shaft?
Partial answer: Not really.
Because the inflation rate has been negative, the nation's 50 million Social Security recipients aren't likely to get a cost-of-living increase next year or the year after that. That hasn't happened since annual adjustments for inflation were made automatic in 1975. However, keep in mind that:
- The monthly payment was increased by 5.8% this year, reflecting higher gas prices in 2008 that have since gone down.
- By law, the COLA can't go down, even if prices do.
- Seniors received $250 this spring as part of the economic stimulus.
- If Social Security checks don't increase across the board, neither will the Medicare Part B premiums for 75% of seniors. Most of those who will see an increase in premiums have high incomes or their premiums are covered by Medicaid.
What is going up -- an average of $2 a month -- is the premiums seniors pay for the ridiculously complicated Medicare prescription drug program. About 32 million seniors are enrolled in that, The Associated Press says, and about 6 million of them have the premiums paid out their monthly Social Security checks -- so those checks will actually look a tad smaller.
Doesn't sound like such a bad deal after all, right? It seems manageable unless you're one of the many folks whose sole retirement income is Social Security. Any price increase in the essentials they buy is going to hurt, particularly if they don't own their home. Consider:
- The average monthly check is $1,153 this year. The maximum is $2,323.
- An MSN Money story by Liz Pulliam Weston from 2007 said: "A third of people age 65 or over rely on Social Security for 90% or more of their incomes, the Social Security Administration says. For about one out of five people in that age group, or 22%, Social Security checks are the sole source of income."
- The Social Security Administration says: "Since Social Security replaces only about 40% of preretirement income for the average worker, it is important to have pensions, savings and investments."
- Many people are electing to take Social Security at age 62 -- which means a smaller monthly payment than if they had waited until full retirement age -- somewhere between 65 and 67, depending on when they were born. Regardless of when you retire, you're not eligible for Medicare, a government health care program for seniors, until age 65.
Meanwhile, there are some winners in this scenario. When the COLA doesn't go up, neither does the top wage on which working people pay the Social Security tax. "The base will hold steady at $106,800 for 2009 through 2012, and then jump to $118,200 in 2013 ...," says the Congressional Budget Office Director's Blog.
Related reading:
Could you survive on Social Security?
4 secret Social Security jackpots
A hidden Social Security benefit
5 myths about Social Security
