Retirees Get Raise, but Can It Keep Up?
The biggest increase in Social Security benefits since 1991
reflects a harsh reality of rising prices.
High energy costs are driving the worst inflation
in more than 25 years.Helen Huntley
of the St. Petersburg Times Personal Finance Editor writes…
October 15, 2005
Social Security recipients will get their largest raise in 15 years next January, but higher Medicare costs will consume a big chunk of it.
The government said Friday that benefits will increase 4.1% for the country’s more than 48 million Social Security beneficiaries. Most of the money will go to 30 million retirees, including about 3.3 million in Florida. Their average benefit will climb $39 a month, to $1,002.
The increase is based on the Consumer Price Index, which rose sharply last quarter as a result of higher energy costs.
But, it may not be enough to actually cover the increased costs retirees are experiencing for everything from food and health care to gas and electricity.
Medicare will take the first bite out of the higher benefit checks. The premium for Medicare “Part B,” which pays for doctor’s visits, is increasing $10.30 a month in January.
In addition, retirees are being offered new drug coverage under Medicare “Part D,” which will cost nothing for many, but may cost up to $34 a month for others.
Retirees with low incomes and high drug bills should see significant savings, but for others the situation is less certain.
Larry Clanton, who will get an extra $38 a month as a result of the increase, says the money won’t go far.
“The raise is totally inadequate for what we are trying to live on,” said Clanton, 69, a retired printer and commercial photographer who lives in Palm Harbor.
“I went to the grocery store and bought what I thought was a light load and it cost $70. If it wasn’t for the fact that my wife is working, the costs would really be killing us.”
His wife, Doris Clanton, 68, spent five years in retirement and then went back to work teaching reading part time. She’ll get a $47 raise from Social Security, but said that won’t cover the gas bill.
“I usually use half a tank a week,” she said. “We just spent $28 for 10 gallons. If we wanted to go somewhere for vacation, forget it.”
Alan Hilkene, a retired accountant who lives in Oldsmar, said the CPI doesn’t reflect the pace at which retirees’ costs are rising.
“We’re given a small hosing by the way the government skewers the figure,” said Hilkene, who is 73.
“We’re just covering the medical part of the spectrum, not all the other components.”
However, he notes that in 10 years “on the dole,” as he puts it, he has long since recovered all the Social Security taxes he and his employers ever paid.
About two-thirds of retirees receive half or more of their income from Social Security. For 22%, Social Security is their only income source, according to the Social Security Administration.
With energy costs soaring, this could be a difficult winter for many retirees, especially in colder climates with big heating bills.
Natural gas bills are expected to be 48% higher than last year and heating oil bills 32% higher.
Electricity costs also are up, with both Progress Energy and TECO Energy filing for rate increases.
The January increase in Social Security benefits is the largest since a 5.4% gain in 1991. The last four years the increases have been less than 3%. This year’s was 2.7%.
The 4.1% adjustment also will go to people who receive disability and survivors benefits and those receiving Supplemental Security Income payments.
Other inflation adjustments that will take effect in January include:
A beneficiary who is younger than normal retirement age can earn up to $12,480 before benefits are reduced, up from $12,000. There is no earnings limit for those who are full retirement age.
The 6.2% Social Security tax will apply to earnings up to $94,200, an increase from $90,000. The 1.45% Medicare tax continues to apply to all earnings.
The maximum benefit for a worker retiring next year at full retirement age will be $2,053.
Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.
© Saint Petersburg Times
Tags: Poverty Analysis