Social Security Benefits to See Biggest Increase in 26 Years
October 24th, 2008
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People who receive Social Security can expect their benefits to increase 5.8% next year. The Social Security Administration said the Cost-of-Living Adjustment (COLA) is the largest since 1982. With the increase, the average monthly payment to retirees will rise to $1,153 from $1,090.
However, despite the increase, many seniors may still have a tough time making ends meet. The cost of Medicare Part B premiums, which are deducted from Social Security benefits, tends to rise faster than the COLA, so the net benefit won’t keep pace with inflation, according to a brief written by Alicia Munnell and Dan Muldoon of the Center for Retirement Research at Boston College.
Seniors are also dealing with higher costs for food, heat, and health care, among other things. Food and beverage prices have jumped an average of 5.9% over the past year. And the American Gas Association says people who heat their homes with natural gas could see their heating bills increase as much as 30% this winter compared with last year.
Rising medical costs are one of the key reasons many older people have a tough time keeping up with their bills. A Bureau of Labor Statistics experimental consumer price index (CPI-E), which measures the cost of goods and services people over 62 are more likely to rely upon, shows that medical costs rose 269% from December 1982 to December 2007, while inflation for other goods and services rose 115%.
So while the increase in benefits is a positive thing, it’s hard to get excited about it when people are dealing with so many price increases at the same time their retirement funds are shrinking. For many older people, any increases in their Social Security benefits will quickly be eaten up by their ordinary, everyday expenses.