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Social Security to go up 1.7%          10/22 08:27

   Millions of older Americans who rely on federal benefits will get a 1.7 
percent increase in their monthly payments next year, the government announced 

   WASHINGTON (AP) -- Millions of older Americans who rely on federal benefits 
will get a 1.7 percent increase in their monthly payments next year, the 
government announced Wednesday.

   It's the third year in a row the increase will be less than 2 percent.

   The annual cost-of-living adjustment, or COLA, affects payments to more than 
70 million Social Security recipients, disabled veterans and federal retirees. 
That's more than a fifth of the country.

   The increase amounts to about $20 a month for the typical Social Security 

   "The COLA helps beneficiaries of all ages maintain their standard of living, 
keeping many from falling into poverty by providing partial protection against 
inflation," said Jo Ann Jenkins, who heads AARP.

   The government announced the benefit increase Wednesday, when it released 
the latest measure of consumer prices. By law, the increase is based on 
inflation, which is well below historical averages so far this year.

   For example, gasoline prices have dropped over the past year while the cost 
of clothing is up by less than 1 percent, according to the September inflation 
report released Wednesday.

   The cost of meat, fish and eggs is up by nearly 10 percent, but the overall 
cost of food is up just 3.1 percent.

   Medical costs, which disproportionately affect older Americans, are up 1.9 
percent over the past year.

   Congress enacted automatic increases for Social Security beneficiaries in 
1975, when inflation was high and there was a lot of pressure to regularly 
raise benefits.

   For the first 35 years, the COLA was less than 2 percent only three times. 
Next year, the COLA will be less than 2 percent for the fifth time in six 
years. This year's increase was 1.5 percent, the year before it was 1.7 percent.

   Social Security is financed by a 12.4 percent payroll tax on the first 
$117,000 of a worker's wages --- half is paid by the worker and half is paid by 
the employer. Next year, the wage cap will increase to $118,500, the Social 
Security Administration said.

   About 59 million retirees, disabled workers, spouses and children get Social 
Security benefits. The average monthly payment is $1,192.

   The COLA also affects benefits for about 4 million disabled veterans, 2.5 
million federal retirees and their survivors, and more than 8 million people 
who get Supplemental Security Income, the disability program for the poor.

   By law, the cost-of-living adjustment is based on the Consumer Price Index 
for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of 
consumer prices generated by the Bureau of Labor Statistics. It measures price 
changes for food, housing, clothing, transportation, energy, medical care, 
recreation and education.

   The COLA is calculated by comparing consumer prices in July, August and 
September each year with prices in the same three months from the previous 
year. If prices go up over the course of the year, benefits go up, starting 
with payments delivered in January.

   "In the last several years we have had extremely low inflation," said 
economist Polina Vlasenko, a research fellow at the American Institute for 
Economic Research. "Basically because inflation is low, the cost-of-living 
adjustment is going to be low, too. It's supposed to just compensate you for 

   Advocates for seniors say the government's measure of inflation doesn't 
accurately reflect price increases faced by older Americans because they tend 
to spend more of their income on health care. The rise in medical costs has 
slowed in recent years, but people hit with serious illnesses can still see 
their individual costs soar.

   People on Medicare, the government health insurance program for older 
Americans, usually have their Part B premiums deducted from Social Security 
payments. The premiums, which cover outpatient care, are scheduled to stay the 
same next year --- $104.90 a month.

   However, federal retirees face a 3.8 percent increase in their health 
insurance premiums next year, said Joseph A. Beaudoin, president of the 
National Active and Retired Federal Employees Association.

   "News of the cost-of-living adjustment for the coming year always is eagerly 
awaited by the countless Americans who rely on the increase to keep up with the 
rising price of food, housing, transportation and medical care," Beaudoin said 
in a statement. "However, despite the partial relief this COLA will provide, 
the announcement is a reminder that our method for calculating the increasing 
cost of goods and services is out of sync with the reality faced by millions of 
federal (retirees), Social Security recipients and military retirees."


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