Social Security checks- Biggest increase in 15 years

WASHINGTON -- Social Security checks for nearly 50 million Americans are going up next year an average of $39 a month, the biggest boost in 15 years, although rising energy bills and higher Medicare premiums will erase a big chunk of the gain for many.

The 4.1 percent cost of living adjustment announced Friday by the Social Security Administration is the biggest increase since a 5.4 percent gain in 1991. Last year's increase was 2.7 percent.

The average Social Security check will increase from $963 to $1,002 in January.

Rising energy prices, including a record-breaking surge in September, were the driving force behind the big cost of living increase, which is based on changes in the government's Consumer Price Index. The inflation figure rose 1.2 percent in September, the biggest monthly increase in a quarter-century, mostly because of a huge hurricane-linked rise in energy costs.

About one-fourth of the monthly Social Security gain will be eaten up by a rise in Medicare premiums, which will grow by $10.30 per month starting in January.

Still, with gas prices high and home heating oil and natural gas prices following suit, seniors across the country were thankful for anything.

"It's something. It's going to pay for probably the telephone bill," said Murray Levine, 86, as he maneuvered a shopping cart full of groceries in downtown Philadelphia.

That sentiment was echoed by Grace Bryan, 75, of Monroe, Ind., who was waiting with her husband for a train at Union Station in Chicago. "We've cut back," she said. "I think a lot on how much we drive -- making our trips count."

The government estimated this week that natural gas bills will rise by 48 percent this winter over last winter and heating oil bills will go up by 32 percent, reflecting energy prices that have soared higher in the aftermath of the Gulf Coast production shutdowns caused by hurricanes Katrina and Rita.

Dean Swafford, 92, a retired farmer in Rayville, Mo., said the additional Social Security money would go to paying his heating bills.

"Everything that we buy has gone up so fast," he said. "The extra money will be spent, that's for sure."

In addition to the higher premium for Medicare Part B, Medicare recipients who decide to take advantage of the new prescription drug benefit will start paying a premium of around $32 per month in January. The amount will vary depending on which plan they choose.

Bill Novelli, head of AARP, formerly the American Association of Retired Persons, said that without the Social Security cost of living adjustments, inflation over the past decade would have reduced beneficiaries' incomes by more than 25 percent. He said the eight out of 10 Americans 65 and older who rely on Social Security as the largest part of their incomes see the COLAS as a critical lifeline.

President Bush had hoped to get Congress this year to pass a Social Security overhaul he viewed as the centerpiece of his second term. It would have bolstered Social Security finances to deal with a looming funding crisis when 78 million baby boomers begin retiring and it would have allowed younger workers to create personal accounts. However, the measure has failed to attract widespread support in Congress.

The cost of living adjustment announced Friday will go to more than 52 million people. More than 48 million receive Social Security benefits and the rest Supplemental Security Income payments, aimed at the poor.

The average retired couple, both receiving Social Security benefits, will see their monthly check go from $1,583 to $1,648.

The standard SSI payment will go from $579 to $603 per month for an individual and $869 to $904 for a couple.

The average monthly check for a disabled worker will go from $902 to $939.

The Social Security Administration also announced Friday that 11.3 million workers will pay higher taxes next year because the maximum amount of Social Security earnings subject to the payroll tax will rise from $90,000 to $94,200 next year. In all, an estimated 159 million workers will pay Social Security taxes next year.

By law, the monthly increase in Medicare premiums cannot be higher than an individual's cost of living adjustment. Social Security recipients whose cost of living increase will be less than the $10.30 premium increase next year will not be forced to pay the entire $10.30.

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Associated Press writers Tara Burghart in Chicago, Jeff Douglas in Kansas City and Ron Todt in Philadelphia contributed to this report.

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On the Net:

Social Security Administration: http://www.socialsecurity.gov