Social Security Benefits to Rise 5.8%

By Michael S. Rosenwald
Washington Post Staff Writer
Friday, October 17, 2008

As seniors struggle with the soaring costs of everyday expenses and hefty hits to their retirement saving accounts, the Social Security Administration yesterday announced a 5.8 percent increase in income benefits, marking the largest cost-of-living adjustment since 1982.

The increase, which affects 55 million Americans, amounts to an extra $63 a month for the average recipient. Some retiree advocates and senior citizens, while welcoming the bump, worried it wasn't enough given even larger increases in other costs, such as health care.

"This will be very welcomed, but 6 percent is not much compared to everything else," said Elaine Destefano, a 72-year-old retiree volunteering yesterday at the Damascus Senior Center. She noted that certain Medicare premiums would rise more than 20 percent. "This is what happens: They gave us a raise, then they increase Medicare, and then you have nothing."

Shannon G. Benton, executive director of the Senior Citizens League, said, "It may take the edge off, but it's not going to lift the burden."

Retirees and advocacy groups such as Benton's organization and AARP have been pushing for higher cost-of-living increases for years. Last year's bump of 2.3 percent came on the heels of low inflation and was the smallest since 2004.

Although energy costs and inflation have come down in recent months -- prices fell by 0.1 percent in September on a seasonally adjusted basis, the government said yesterday -- the annual increase is based on a consumer price index from July through September compared with the same period the previous year. Record high oil prices, which pushed above $140 a barrel over the summer, have had a big impact on the price indexes and played a role in the comparison the Social Security Administration used to establish the increase.

Seniors who rely on Social Security benefits -- for one in three recipients, it is nearly all of their monthly income -- say they are finding it difficult to adjust to higher prices on everything from gas to prescriptions to a dozen grade A eggs, which cost 103 percent more than in 2002. A recent AARP survey said that 59 percent of people age 65 and over found it more difficult to pay for food, gas and medicine. Forty-seven percent found it more difficult to pay for utilities.

Destefano said she would almost certainly use the extra money to pay for gas and food. "That's where prices really cut into the budget," she said.

Marcia May, a retiree teaching an exercise class at the Damascus Senior Center, said heating oil increases have been her biggest fear and that the cost-of-living increase gave her some solace given that her individual retirement account, like that of many other Americans, has been battered in the economic downturn. The cost-of-living increase will help "ward off getting panicked about income from the stock market," she said.

To help even more with everyday expenses, some senior citizens groups have been pushing for a change in how cost-of-living increases are calculated. The Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, also known as the CPI-W. The Senior Citizens League wants the agency to use an experimental consumer price index for people age 62 and older, arguing it more accurately reflects retiree expenses and could lead to higher benefits. The experimental index has a higher weighting for housing and medical costs.

In the past 25 years, the advocacy group said, the experimental index was higher than the CPI-W in all but three years. A spokesman for the Senior Citizens League noted that a senior who retired with the average monthly benefit of $460 in 1984 would have received more than $11,000 more under the experimental index than under the current system.

Benton said her organization would lobby Congress again for the change in indexes next year, with the stipulation that if the other index ever comes in higher, it would be used instead.

David Certner, AARP's legislative policy director, said he would rather see lower health-care costs for seniors than a change in the index.

Also yesterday, the Social Security Administration said the amount of income taxable in 2009 for purposes of Social Security will increase, from $102,000 to $106,800. About 11 million workers will pay higher taxes because of the change, the administration said.

Staff writer Howard Schneider contributed to this report.

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