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What's New? Q: Are people on Social Security getting a raise in January? 11/20/2008 - A: Yes - 55 million Americans will see their Social Security checks go up by 5.8% in January. That’s the largest increase in 26 years---but the gain may go up in smoke as seniors struggle with higher energy costs that helped fuel the Cost of Living Adjustment increase this past year. Starting in January, the average retired worker will see an extra $63 a month in his or her Social Security check. That’s $756 a year. But that increase could be burned up by rising oil costs alone. In Massachusetts, oil now costs $1 more per gallon than last heating season. By your third tank of oil this winter, your COLA increase has been burned up by oil hikes. On top of that are higher costs at the grocery store. Many Americans are surprised to learn that the typical retiree will receive only $13,836 this coming year. That’s a little better than the $13,080 figure from 2008---but nothing to write home about! The average elderly widow living alone will have only $13,344 a year from Social Security. That’s just shy of $37 a day to live on—assuming no other income. Millions of retirees are forced to get part time jobs to keep their head above water. In 2009, people who retire before the full retirement age (which varies depending on the year you were born) can earn up to $14,160 a year without losing any Social Security benefits. But for every $2 they earn over that limit, they lose $1 in Social Security. For people who have reached their full retirement age there is no “earnings penalty” applied to your Social Security---so you can work as much as you want. The most anyone receives on Social Security at full retirement in 2009 is $27,876---or about $138 a month higher than last year. As noted above, the average retiree will get only $1,153 a month from Social Security. Retirement in America has been described as a three-legged stool made up of Social Security, Pensions, and private savings. But today, among elderly Social Security beneficiaries, 52% of married couples and 72% of unmarried persons receive 50% or more of their income from Social Security. Many elders have no pension, and their private savings have dwindled. 20% of married couples on Social Security, and about 41% of unmarried persons rely on Social Security for 90% or more of their income. For these people, Social Security is their financial lifeline. To calculate the COLA, Social Security looks at the change in the Consumer Price Index for Urban Wage Earners from the period July, August and September of 2007, compared to the same three months in 2008. The CPI-W went up $5.8% this year. But for years Congress has debated whether or not this CPI system really reflects the needs of older people, who have higher medical costs, for example, than younger workers. But no change in this method is likely anytime soon. Social Security projects that the elderly population will double over the next 25 years to 74 million people, and the number of workers paying into the Social Security Trust fund will drop by more than one-third, from 3.3 workers per beneficiary, to 2.1. One of the solutions to the financial concerns facing Social Security is to remove the cap on taxable wages on workers paying into the system, which in 2009 is capped at $106,800. People earning more than this cap pay no additional Social Security taxes. Unearned income, such as dividends from stocks and bonds, are not counted as taxable income—unless you’re a stock merchant with customers. Congress may have to close loopholes like this to help keep the Trust funds solvent, as the baby boomers retire in record setting numbers. Back to What's New?
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