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Social Security Payments to Rise 2.7 Percent

About 20 percent of the nation's elderly rely on Social Security for all their income, the government estimates. For eight of 10 retirees, the program provides their primary source of income, AARP said.

The Labor Department also reported that another measure of inflation, its more widely followed consumer price index for all urban consumers, rose a modest 0.2 percent last month and 2.5 percent in the 12 months that ended in September.

William D. Novelli, chief executive of AARP, calls the adjustments "good and bad news." (Matt Cilley - AP)

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Social Security

Higher prices last month for transportation, medical care, recreation, education and communication were largely offset by falling energy prices. But many economists expect the recent run-up in crude oil prices to push gasoline, heating oil and other energy prices higher in coming months.

"To be sure, energy prices were quite tame in September. . . . But starting next month, higher energy prices will resume ravaging consumers' wallets," David Rosenberg, chief U.S. economist for Merrill Lynch & Co., wrote in an analysis.

After excluding volatile food and energy prices, so-called core prices rose 0.3 percent for the month and 2 percent over the past year.

After adjusting for the latest inflation figures, the Labor Department also reported yesterday that average weekly earnings for most workers were flat in September.

But because of the increase in average wages over the year, the maximum amount of earnings subject to the Social Security tax will grow to $90,000 next year from $87,900 this year. Of the estimated 159 million workers who will pay the tax next year, about 9.9 million will pay more as a result of the increase in the ceiling, the administration said.

The maximum Social Security benefit for a worker retiring at full retirement age will rise to $1,939 a month next year from $1,825 a month this year. Most retirees, however, do not qualify for the maximum benefit because their earnings during their working years were not high enough.

Disabled workers will get an average benefit of $895 a month next year, up from $871 a month this year.

Workers used to be able to retire at their 65th birthday and receive full Social Security benefits, but that age has been rising. This year, people born in 1939 had to wait until they were 65 years and four months old to receive full benefits. Next year, people born in 1940 will have to wait until they are 65 years and six months.

The full retirement age is set by law, and it is being raised to encourage workers to retire later, which should reduce financial pressure on the system over time.

Some economists have argued that the age should go higher still, since Americans are living longer, and in better health. Others counter that while a higher retirement age may be reasonable for academics and others who primarily perform intellectual labor, it is less acceptable for those who spend many years engaged in physical labor.

Staff writer Stephen Barr contributed to this report.

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