Se­niors to get small in­crease

0.3 per­cent rise is fifth in a row of tiny boosts for So­cial Se­cu­rity

Baltimore Sun - - FRONT PAGE - Bal­ti­more Sun Re­porters Natalie Sher­man and Lor­raine Mirabella and the As­so­ci­ated Press con­trib­uted to this ar­ti­cle.

Mil­lions of So­cial Se­cu­rity re­cip­i­ents and fed­eral re­tirees will get a 0.3 per­cent in­crease in monthly ben­e­fits next year, the fifth year in a row that older Amer­i­cans will have to set­tle for his­tor­i­cally low raises.

The ad­just­ment adds up to a monthly in­crease of less than $4 a month for an av­er­age re­cip­i­ent.

The cost- of-liv­ing ad­just­ment, an­nounced by the govern­ment Tues­day, will af­fect more than 70 mil­lion peo­ple — about1 in 5 Amer­i­cans. For re­cip­i­ents, the av­er­age monthly So­cial Se­cu­rity pay­ment now is $1,238.

Un­for­tu­nately for some se­niors, even the small in­crease prob­a­bly will be wiped out by an ex­pected in­crease in Medi­care Part B pre­mi­ums, which are usu­ally de­ducted from So­cial Se­cu­rity pay­ments.

With that ex­pected in­crease, “It’s un­der­stand­able that peo­ple are con­cerned about the very small in­crease in the COLA,” said Hank Green­berg, state direc­tor for AARP Mary­land. “Peo­ple are hav­ing to bal­ance pre­scrip­tion drug costs with util­ity costs, with daily needs.”

About 936,000 peo­ple in Mary­land are So­cial Se­cu­rity ben­e­fi­cia­ries, Green­berg said. Nearly a fifth of Mary­land’s re­cip­i­ents rely on So­cial Se­cu­rity for 90 per­cent or more of their in­come, he said. More than 37 per­cent rely on the ben­e­fit for half or more of their in­come, Green­berg said.

“So hav­ing an in­crease is bet­ter than what we had this year, which was zero, when you con­sider pre­scrip­tion drug prices are up and health costs are cer­tainly higher than 0.3 per­cent,” he said.

By law, pre­mium in­creases for most Medi­care re­cip­i­ents can­not ex­ceed their So­cial Se­cu­rity cost-of-liv­ing in­crease. That’s known as the “hold harm­less” pro­vi­sion. How­ever, new en­rollees and high-in­come re­tirees are not cov­ered by that pro­vi­sion, so they could face higher Medi­care pre­mi­ums, which will be an­nounced later this year.

John and Eve­lyn Kirby, who are re­tired and live in Ch­ester on the East­ern Shore, are not cov­ered by that “hold harm­less” pro­vi­sion be­cause their com­bined in­come puts them in the high-in­come bracket. John Kirby, 76, is a So­cial Se­cu­rity re­cip­i­ent, but his wife re­ceives a pen­sion from the 40 years she worked her way up from clerk to se­nior level jobs for the fed­eral govern­ment.

“Just be­cause I pay my Part B pre­mi­ums from some­thing other than So­cial Se­cu­rity, I’m go­ing to get slammed, as will my hus­band ... with in­cred­i­bly high Part B pre­mi­ums,” Eve­lyn Kirby said. “So the few dol­lars he’ll get in a So­cial Se­cu­rity in­crease as a re­sult of the COLAis smoke in the wind. His take home will go down. And I know there have to be other sin­gle and mar­ried peo­ple in the same sit­u­a­tion.”

There was no So­cial Se­cu­rity ben­e­fit in­crease this year, and next year’s will be small be­cause in­fla­tion is low, driven in part by cheaper fuel prices.

The low in­fla­tion rate should help keep some older folks’ bills from rising very rapidly.

More than 60 mil­lion re­tirees, dis­abled work­ers, spouses and chil­dren get So­cial Se­cu­rity ben­e­fits. The COLA also af­fects ben­e­fits for about 4 mil­lion dis­abled vet­er­ans, 2.5 mil­lion fed­eral re­tirees and their sur­vivors, and more than 8 mil­lion peo­ple who get Sup­ple­men­tal Se­cu­rity In­come, the dis­abil­ity pro­gram for the poor. Many peo­ple who get SSI also re­ceive So­cial Se­cu­rity.

Since 2008, the COLA has been above 2 per­cent only once, in 2011. It’s been zero three times.

“This loss of an­tic­i­pated re­tire­ment in­come com­pounds ev­ery year, caus­ing peo­ple to spend through re­tire­ment sav­ings far more quickly than planned,” said Mary John­son of the Se­nior Cit­i­zens League. “Over the course of a 25- or 30-year re­tire­ment, it re­duces an­tic­i­pated So­cial Se­cu­rity in­come by tens of thou­sands of dol­lars.”

The cost-of-liv­ing ad­just­ment is based on a broad mea­sure of prices gen­er­ated by the Bu­reau of La­bor Statis­tics. It mea­sures price changes for food, hous­ing, cloth­ing, trans­porta­tion, en­ergy, med­i­cal care, re­cre­ation and ed­u­ca­tion.

If prices go up, ben­e­fits go up. If prices drop or stay flat, ben­e­fits stay the same.

Though costs have gone up in some ar­eas, they’ve gone down in oth­ers, said Daraius Irani, chief econ­o­mist at Tow­son Univer­sity’s Re­gional Eco­nomic Stud­ies In­sti­tute.

“In­fla­tion has not been a prob­lem that we’ve ex­pe­ri­enced,” he said. “This is prob­a­bly the right amount” for the in­crease.

Gaso­line prices have fallen by more than 6 per­cent over the past year, ac­cord­ing to the Septem­ber in­fla­tion re­port, while the cost of med­i­cal care has gone up by more than 5 per­cent. Food prices also are down.

For se­niors who don’t drive much, they don’t get the full ben­e­fit of low gas prices, said Max Gulker, a se­nior re­search fel­low at the Amer­i­can In­sti­tute for Eco­nomic Re­search. Many se­niors spend more of their in­come on health care.

Demo­cratic pres­i­den­tial nom­i­nee Hil­lary Clin­ton has em­braced the idea of ex­panded ben­e­fits for cer­tain low-in­come re­tirees. She says the na­tion would pay for it by rais­ing taxes on “the high­est-in­come Amer­i­cans.”

Break­ing with other Repub­li­cans, GOP nom­i­nee Don­ald Trump has pledged not to cut ben­e­fits. How­ever, he has of­fered few specifics on how he would ad­dress So­cial Se­cu­rity’s long-term fi­nan­cial prob­lems.

So­cial Se­cu­rity is fi­nanced by a 12.4 per­cent tax on the first $118,500 of a per­son’s an­nual wages, with the worker pay­ing half and the em­ployer pay­ing the other half. The amount of wages sub­ject to the pay­roll tax will go up to $127,200 next year, the So­cial Se­cu­rity Ad­min­is­tra­tion said.

About 173 mil­lion work­ers will pay So­cial Se­cu­rity taxes next year — about 12 mil­lion of them will face higher taxes be­cause of the higher cap, the agency said.

“It’s un­der­stand­able that peo­ple are con­cerned about the very small in­crease in the COLA,” Hank Green­berg, AARP Mary­land state direc­tor, said.

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