Lower inflation means smaller raises in Social Security

Associated Press WriterWASHINGTON (AP) -- Social Security recipients will get a 2.6 percent cost-of-living increase in their monthly checks next year, which translates into an extra $22 a month for the average retiree.

Next year's increase, announced Friday for more than 50 million Social Security recipients, is smaller than this year's 3.5 percent boost -- a nine-year high -- because inflation pressures have slowed.

"Today's news tells us that inflation continues to be low, which is certainly good news for the elderly and disabled," said Larry G. Massanari, acting commissioner of the Social Security Administration.

Monthly Social Security checks are adjusted annually to keep rising prices from eroding recipients' income.

The average monthly check for retirees will increase from $852 to $874 starting in January.

The maximum monthly payment for low-income beneficiaries will increase $14 to $545. For a low-income couple, the maximum monthly benefit will increase $21 to $817.

Separately, the government announced that monthly Medicare premiums will increase by $4 a month next year to $54. The premiums are deducted from most elderly and disabled Americans' Social Security checks for insurance coverage of doctors' office visits.

The increase, which takes effect Jan. 1, reflects higher health care costs and is legally mandated. It is not based on the cost-of-living adjustment.

Social Security's annual adjustment is automatic and is tied to changes in the Consumer Price Index, one of the government's chief measures of inflation.

Except for this year's 3.5 percent increase, yearly adjustments have remained at or below 3 percent since 1993. In contrast, double-digit inflation in the late 1970s drove the cost-of-living adjustment to 14.3 percent in 1980.

Social Security also announced that for working Americans, the maximum annual earnings subject to Social Security taxes next year will rise to $84,900 from $80,400. Of the 154 million workers who pay Social Security taxes, only about 10.5 million will be affected by the higher wage base in 2002.

------On the Net:

Social Security: http://www.ssa.gov

Department of Health and Human Services: http://www.hhs.gov