WASHINGTON — The 45.2 million Americans who receive Social Security checks will see them grow by 3.5 percent next year, the biggest cost-of-living increase in almost a decade.
That’s because inflation has picked up speed, almost entirely a reflection of surging energy prices. The benefit increase for retirees will average $29 a month.
The increases, which will begin showing up in benefit payments for January, were announced by Social Security based on inflation figures released Wednesday by the Labor Department.
The cost-of-living announcement comes just weeks before Americans elect a new president Nov. 7.
The elderly are the segment of America most likely to vote, and of the five states with the largest percentage of people 65 and older in their populations, four — Florida, Iowa, Pennsylvania and West Virginia — are close battlegrounds in this election. Other states with large senior populations and where the candidates are close include Arizona, Arkansas, Michigan, Missouri and Ohio.
Texas Gov. George W. Bush, the Republican presidential nominee, and Vice President Al Gore, the Democrat, have repeatedly clashed over Social Security. Bush proposes allowing individuals some control over how to invest their retirement funds, while Gore says that would threaten the long-term solvency of the nation’s huge retirement system.
The 3.5 percent increase was the largest since a 3.7 percent rise in 1992. It means the average monthly check for retirees will rise to $845 next year, up from $816 this year.
That compares with an increase of 2.4 percent for 2000, which translated into an average of $19 a month more for retirees.
In addition to retirement checks, the increases affect Social Security benefits paid to disabled workers and families whose breadwinners have died.
The maximum monthly payment for low-income individuals receiving Supplemental Security Income, known as SSI, also will rise by 3.5 percent. That will boost the maximum monthly SSI check by $18 to $530. For a couple, the SSI maximum goes up $27 to $796. Increased payments to SSI recipients will begin Dec. 29.
"The annual cost-of-living adjustment is one of the most critically important features of the Social Security program," said Social Security Commissioner Kenneth Apfel. "For the elderly, it guarantees that their foundation of retirement income will remain strong for as long as they live."
Separately, the Department of Health and Human Services announced that the monthly Medicare premium deducted from most elderly and disabled Americans’ Social Security checks for insurance coverage of doctors’ office visits will increase by $4.50 to $50 in 2001. The increase, which takes effect Jan. 1, reflects higher health care costs and changes in Medicare law. It is not based on the cost-of-living adjustment tied to the Consumer Price Index.
Since 1975, the cost-of-living adjustment has been automatic, requiring no vote by Congress. It is calculated based on changes in the Consumer Price Index — the government’s inflation yardstick — from the third quarter of one year to the corresponding quarter of the next.
Because of tame inflation, the yearly benefit boosts have been below 3.0 percent since 1994. The 1999 increase of 1.3 percent matched a record low set in 1987.
More recently, consumer prices have been edging up, largely because of higher energy costs. Crude-oil prices hit a 10-year high in September, contributing to costlier gasoline and heating oil.
While overall inflation is rising, it is still moderate compared with other periods. Double-digit inflation in the late 1970s, for example, drove the cost-of-living increase up to 14.3 percent in 1980.
Social Security also announced Wednesday that for working Americans the maximum annual earnings subject to Social Security taxes next year will rise to $80,400 from $76,200. That limit, along with the Social Security tax rate of 6.2 percent, is set by law.
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