Soc. Security to Get Minimal Raise
By MARTIN CRUTSINGER The Associated Press October 17, 2002
WASHINGTON (AP) - The 46 million Social Security recipients will get the
smallest increase in their benefit checks in four years come January, a 1.4
percent rise that translates to just $13 a month more for the typical retiree.
About one-third of that will be eaten up by an increase in monthly Medicare
premiums.
The announcement of Social Security's modest cost-of-living adjustment, coupled
with word that monthly Medicare premiums next year will go up by $4.70 to
$58.70, left many retirees worried Friday about how they will pay their bills.
Many already were in severe trouble because declines in stock prices this year
have wiped out trillions of dollars in investments.
``Some of our friends, they've seen their (401(k) accounts) lose over 50
percent, and now they're concerned whether they can stay retired,'' said Ellen
Long, 74, a former math and reading tutor in Fort Collins, Colo. ``Right now,
we're holding our breath.''
Ray Owens, a former church administrator in Columbia, S.C., said he and his wife
decided to retire early this year and had hoped to use their investments to
supplement their Social Security earnings.
``Of course, right after that all hell broke loose, and the stock plummets,''
said Owens, 67, who has had to cash in some of his investments to meet expenses.
``We're having to dig into the golden goose.''
Advocacy groups for older Americans said retirees were being caught in a squeeze
between retirement savings plummeting because of the falling stock market and
medical costs continuing to soar. That problem is made worse by Congress'
failure to pass legislation this year that would have added drug coverage to
Medicare.
``For millions of people without drug coverage, this 1.4 percent cost-of-living
increase is not going to even come close to the soaring cost of prescription
drugs they are facing,'' said David Certner, director of federal affairs for
AARP, formerly known as the American Association of Retired Persons.
The 8.7 percent increase in monthly Medicare premiums is mandated by Congress so
that premiums will cover 25 percent of the cost of the health care program for
the elderly. Those premiums were set at $3 a month when Medicare began in 1967.
Social Security's 1.4 percent cost-of-living increase, which also will go to 7
million recipients of Supplemental Security Income, the government's cash
assistance program for the poor, is the smallest since a 1.3 percent rise in
1999. This year's benefits boost was 2.6 percent, and in 2001 it was 3.5
percent, the biggest rise in nine years.
The country's first recession in a decade last year and this year's stop-and-go
recovery have combined to keep the lid on inflation, which means a smaller
cost-of-living adjustment for government benefits.
Social Security Commissioner Jo Anne Barnhart called the containment of
inflation ``certainly good news for the elderly and disabled,'' since those
living on fixed incomes suffer most from rising prices.
Friday's announcements came in the closing weeks of a hard-fought campaign for
control of Congress in which both parties have tried to use Social Security's
financial plight to their advantage.
Two years ago, President Bush campaigned for the White House on a program that
would have privatized Social Security partially by allowing younger workers to
divert part of their Social Security taxes into personal investment accounts.
With the plunging stock market, however, Democrats have accused Bush and
Republican supporters of the approach of putting retirees' pension benefits at
risk. The GOP counters that Democrats have failed to propose a plan to bolster
the government's biggest benefit program, which is facing a severe cash crunch
with the retirement starting in the next decade of the baby boom generation.
Most experts believe the next Congress will remain deadlocked over the issue as
the return of federal budget deficits means little money will be available to
close the financing gap.
``Neither side is willing to face the fact that it takes money to fix the
problem,'' said David Wyss, chief economist at Standard & Poor's in New York.
Starting in 1975, monthly Social Security checks have been adjusted
automatically to protect retiree benefits from being eroded by inflation. The
increase is based on the rise in the Consumer Price Index from the
July-September quarter of one year to the next.
With Friday's announcement, the average monthly check for individual retirees
will rise from $882 currently to $895 starting in January. The average retired
couple will see monthly checks go from $1,463 to $1,483, an increase of $20.
The 1.4 percent increase for the needy receiving SSI payments will translate
into a maximum payment of $552 a month for an individual, an increase of $7. For
a couple, the maximum payment will rise to $829 a month, an increase of $12.
Social Security also announced that for working Americans, the maximum annual
earnings subject to Social Security taxes next year will rise to $87,000 from
$84,900 currently. This change will affect about 9.7 million of the 155 million
workers paying Social Security taxes.
Associated Press Writer Elizabeth Wolfe contributed to this
report.
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