published Wednesday, October 19th, 2011

Social Security to hand out first raises since ’09

Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's financial management services facility in Philadelphia. Social Security recipients will get a raise in January, their first increase in benefits since 2009. Experts expect the increase will be about 3.5 percent. Some 55 million beneficiaries find out for sure today when an inflation measure that determines the annual cost-of-living adjustment is released.
Trays of printed Social Security checks wait to be mailed from the U.S. Treasury's financial management services facility in Philadelphia. Social Security recipients will get a raise in January, their first increase in benefits since 2009. Experts expect the increase will be about 3.5 percent. Some 55 million beneficiaries find out for sure today when an inflation measure that determines the annual cost-of-living adjustment is released.
Photo by Associated Press.

By STEPHEN OHLEMACHER, Associated Press

WASHINGTON — Social Security recipients will get a raise in January — their first increase in benefits since 2009. It’s expected to be about 3.5 percent.

Some 55 million beneficiaries will find out for sure Wednesday when a government inflation measure that determines the annual cost-of-living adjustment is released.

Congress adopted the measure in the 1970s, and since then it has resulted in annual benefit increases averaging 4.2 percent. But there was no COLA in 2010 or 2011 because inflation was too low. That was small comfort to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values drop during the period of economic weakness, said David Certner, legislative policy director for the AARP.

“People certainly feel like they are falling behind, and these are modest income folks to begin with, so every dollar counts,” Certner said. “I think sometimes people forget what seniors’ incomes are.”

Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments. Medicare Part B premiums for 2012 are expected to be announced next week, and the trustees who oversee the program are projecting an increase.

Monthly Social Security payments average $1,082, or about $13,000 a year. A 3.5 percent increase would amount to an additional $38 a month, or about $455 a year.

Most retirees rely on Social Security for a majority of their income, according to the Social Security Administration. Many rely on it for more than 90 percent of their income.

Federal law requires the program to base annual payment increases on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Officials compare inflation in the third quarter of each year — the months of July, August and September — with the same months in the previous year.

If consumer prices increases from year to year, Social Security recipients automatically get higher payments, starting the next January. If price changes are negative, the payments stay unchanged.

Only twice since 1975 — the past two years — has there been no COLA.

Wednesday’s COLA announcement will come as a special joint committee of Congress weighs options to reduce the federal government’s $1.3 trillion budget deficit. In talks this summer, President Barack Obama floated the idea of adopting a new measure of inflation to calculate the COLA, one that would reduce the annual increases.

Advocates for seniors mounted an aggressive campaign against the proposal, and it was scrapped. But it could resurface in the ongoing talks.

“We’re very concerned about that,” said Web Phillips of the National Committee to Preserve Social Security and Medicare. “I think that what this illustrates is the dangers of trying to make Social Security policy in the context of deficit reduction.”

Social Security payments increased by 5.8 percent in 2009, the largest increase in 27 years, after energy prices spiked in 2008. But energy prices quickly dropped and home prices became soft in markets across the country, contributing to lower inflation the past two years.

For example, average gasoline prices topped $4 a gallon in the summer of 2008. But by January 2009, they had fallen below $2. Today, the national average is about $3.46 a gallon.

“A lot of that increase had to do with energy,” Polina Vlasenko, an economist at the American Institute for Economic Research, based in Great Barrington, Mass., said of the 2009 change.

As a result, Social Security recipients got an increase that was far larger than actual overall inflation. However, they weren’t to get another increase until consumer prices exceeded the levels measured in 2008.

So far this year, prices have been higher than that, Vlasenko said. Based on consumer prices in July and August, the COLA for 2012 would be about 3.5 percent. Vlasenko estimates the COLA will be from 3.5 percent to 3.7 percent.

Advocates for seniors say it’s about time.

“If you’ve been at the grocery store lately and remember what you used to pay for things, see what you’re paying for things today,” Phillips said. “The cost-of-living adjustment makes sure that the Social Security benefit that you qualify for when you retire or you become disabled continues to stay current with prices so that the buying power of your benefit does not decline over time.”

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dao1980 said...

This headline/statement... pairs social security.. with the term "hand out".

Is this on purpose?

Kinda inappropriate, being that the amount that I pay into social security over my working lifespan will immensely dwarf the amount that I will ever receive from it upon my retirement.

Especially since I will be penalized with a smaller payment if I do any personal planning and invest wisely for robust savings to enjoy during my retirement.

What a crap scheme with no option to "opt" out.

October 19, 2011 at 10:12 a.m.
amnestiUSAF84 said...

What a crap scheme with no option to "opt" out.

But look at Brazil's opt out plan, dao. The one candidate Herman Cain is praising. Those who opt out ended up being poorer than if they'd remained in the Braizil government retirement, or SS plan. In fact, those who opt out of Brazil's government plan are now actually subsidized by their government. Their opt out plan turned into a massive failure.

October 19, 2011 at 11:25 a.m.
onetinsoldier said...

I have 39 years invested in Social Security and if you are a repugnant that wants to mess my investment, beware. There are 50 million of us and we vote regularly. Like your token says. Mess with that fence and it will kill you.

Dao1980; You need to fight to improve Social Security and protect it in the future from the money changers so you have it when you retire. Don't buy into the rhetoric about you never seeing a return.

October 19, 2011 at 12:08 p.m.
dao1980 said...

What other investment and savings opportunities did the Brazilians who opted out partake in?

Did they contribute generously to their 401K's or IRA's?

Did they partition amounts of their income to simple savings accounts?

Did they invest in land and buy stocks in diverse markets?

If they did all of these things and still ended up "poorer" than those who "lent" their hard earned money interest free to their government only to be re payed a small percentage of the total amount lent, how much "poorer" were they?

I need some help with perspective on your point amnesti.

October 19, 2011 at 12:14 p.m.
dao1980 said...

I do agree with many aspects of the original idea, onetinsoldier.

I just can't help but notice that our investment has been bought and sold so many times that there is none left for the investors.

October 19, 2011 at 12:22 p.m.
amnestiUSAF84 said...

dao1980 said... Did they contribute generously to their 401K's or IRA's?

You've forgotten, we'll assume, how big America's 401k investors lost just a few short years ago when the market crashed. Many of those who were close to retiring will now have to work several more years--some won't live long enough to enjoy any retirement. America's SS government plan remains the safest, regardless. The fatkats encouraging you otherwise are looking out for their own interest. Remember the Brazil's idea of private investment for retirement was thought up by former dictator, Pinochet, and during a time when Brazil's stock market was in the toilet. Even their fire and police refused to invest in it and remained with their government retirement plan.

dao, if you think you can live off of $351.00 a month or less, then go ahead!

October 19, 2011 at 12:33 p.m.
dao1980 said...

amnesti,

What about the other methods of saving and investing that I mentioned?

Most any financial adviser would use an egg/basket analogy here.

I can assure you that no "fatcats" lead me in my understanding of cause and effect.

As a result of my personal perspective, I feel that in this world of fleeting personal responsibility, large group programs are only great to take care of those who wish to be taken care of.

I personally would prefer to use my resources as I see fit, and enjoy/endure the gains or losses as part of the gamble.

Where the heck are you getting $351.00 a month from? Is it something I missed in the story above?

October 19, 2011 at 1:03 p.m.
onetinsoldier said...

We must demand that congress keep its hands off Social Security and that it be protected and kept solvent. Social Security is the best contract our government ever made with the people, and America will rue the day, that they lose it. Who do you trust? The American people or the stock market. One you get to vote on, the other you are left to the manipulations of the greedy.

October 19, 2011 at 1:18 p.m.
amnestiUSAF84 said...

dao1980 said... Where the heck are you getting $351.00 a month from? Is it something I missed in the story above?

No, dao, that's what the average Brazilian who went the pinochet way ended up living off of. That Brazilian prviate investment retirement way Herman Cain is singing the high praises of. That same private Brazilians pay as much as 15% or more to their investors to handle their investment funds. The only ones that got rich at the expense of the retirees were those investors paid 15% and more by the workers. Those retires who went the private way, when retired, on the average receive only about 351.00 a month. The government ended up still having to subsidized their retirement funds to make up for their loss.

The private sector will always pay itself first.

October 19, 2011 at 8:46 p.m.
dao1980 said...

So... what your saying is... if I live in Brazil, I should not diversify my investments?

I appreciate the example, but I don't think we're comparing apples to apples here.

Though I guess my point is moot as well, since in reality there is no option to opt out of our "most give allot and everybody gets a little" plan.

That being the reality here, I do hope S.S. is still around by the time I reach retirement.

I'll make sure to grumble loudly as I receive each check for pennies on my contributed dollar, whilst knowing that the sleazy politicians in congress who are bought and sold daily have borrowed interest free from my contribution and not paid a cent back.

October 20, 2011 at 7:59 a.m.
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