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2009 Social Security COLA Increase Gets Mixed Reviews
By
Michael A. Piekarz
Spectrum Staff Writer
The
largest increase in the Social Security Cost-of-Living Adjustment
(COLA) since 1982 is drawing mixed reactions from senior advocates
concerned that the increase is still not enough to keep many seniors
above the poverty level.
In mid-October, the Social Security Administration (SSA) announced that monthly
Social Security and Supplemental Security Income benefits for more than 55 million
Americans will increase by 5.8 percent in 2009.
Social Security and Supplemental Security Income benefits increase automatically
each year based on the rise in the Bureau of Labor Statistics’ Consumer
Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third
quarter of the prior year to the corresponding period of the current year.
The increases will take effect on January 1, 2009 for most beneficiaries.
Some advocates were quick to view the move as one bright spot in an otherwise
glum economy for seniors.
“Given this economy, the Social Security COLA is a lone piece of good news
for seniors,” said Barbara B. Kennelly, President/CEO of The National Committee
to Preserve Social Security and Medicare. “Social Security’s COLA
is absolutely essential to keeping America’s seniors out of poverty.”
According to Kennelly, 20 percent of seniors rely on their Social Security checks
as a sole source of income, and any increase is important to offset increased
health care costs and fuel costs during a time of decreasing investments and
falling home values.
While pleased with the increase, Kennelly’s praise was limited. “For
too many seniors, this average $63 per month will probably already be spent before
it arrives,” she explained.
Other advocates were bluntly critical in their assessment of the 2009 COLA.
“The standard-of-living for some 50 million Americans is dropping due to
the highest inflation since 1982,” stated Daniel O’Connell, chairman
of The Senior Citizens League (TSCL). “The COLA doesn’t accurately
reflect real inflation, especially costs experienced by seniors.”
According to O’Connell, the COLA is an urgently needed annual increase,
but it won’t be enough to offset the rapidly rising costs clobbering retirees
on fixed income.
Items cited as heavily impacting seniors include an increase in the Medicare
Part D premium, double-digit inflation of heating oil prices, and food prices
soaring at the fastest pace in nearly 20 years.
O’Connell said the use of the CPI-W is problematic as a basis to calculate
the yearly COLA, because seniors spend their money very differently than younger
working people.
“Seniors must spend much more on health care costs, but they have a much
lower income to do so,” said O’Connell, citing one example.
The net result, according to TSCL, is that the increase still badly trails inflation,
leaving seniors with less buying power than they currently have. And, they say,
it will thrust more elderly Americans into poverty.
Most Americans who receive a Social Security check depend on it for at least
50 percent of their total income, and one in three beneficiaries rely on it for
90 percent or more of their total income.
“Social Security is supposed to protect seniors in need — but with
5 million seniors below the poverty line, it’s clear the system is failing
them,” said Shannon Benton, executive director of TSCL.
“Seniors know that even the relatively large increase isn’t nearly
enough to shield them from costs skyrocketing by double digits.”
One solution proposed by TSCL is to use a senior-specific CPI to calculate the
annual COLA — the Consumer Price Index for the Elderly (CPI-E). The CPI-E
is based on living costs borne by seniors instead of the wage increase-based
CPI-I.
The maximum amount of earnings subject to the Social Security tax was also raised
to $106,800 from $102,000. The “taxable maximum” is based on the
increase in average wages for the previous year.
Of the estimated 164 million workers who will pay Social Security taxes in 2009,
about 11 million will pay higher taxes as a result of the increase in the taxable
maximum.
This page and its contents ©2008
Metropolitan News Company, Inc.
