Social Security checks get bigger

WASHINGTON — In a yearly ritual that dates back more than three decades, nearly 49 million Americans will be getting a little something extra in their Social Security checks come January.

The typical retiree will see an extra $33 per month, an amount designed to help offset the effects of rising inflation for people on fixed incomes.

The latest cost of living adjustment, or COLA, was announced by the Social Security Administration on Wednesday and it will start showing up in the monthly Social Security benefit payments — whether by a check in the mail or direct deposit to the bank — in January.

The average retiree benefit of $1,011 a month will climb to $1,044 next year.

The cost of living adjustment goes to more than 53 million people. Nearly 49 million of them receive Social Security benefits while the rest get Supplemental Security Income payments aimed at the poor.

The 3.3 percent increase compares with a 4.1 percent benefit rise in for 2006, which had been the biggest increase in 15 years.

Benefit payments have been tied to inflation since 1975. Those increases surged in the early years of the program as the country was beset with double-digit inflation in the late 1970s and early 1980s.

But the increases have been more moderate in recent years as the Federal Reserve has had more success in keeping inflation under control.

The COLA amount is based on the change in the Consumer Price Index from the July-September quarter of this year compared with the same quarter in 2005. Last year, prices surged in September, reflecting a big spike in energy costs after Hurricane Katrina.

But this year, energy prices, which initially leaped because of rising Mideast tensions, have been falling since late summer. Those declines helped pull consumer prices down by 0.5 percent in September, the biggest drop in 10 months.

Falling energy prices should help retirees deal with winter heating bills, which for the first time in a number of years are expected to be lower this winter.

The average retired couple, both receiving Social Security benefits, will see their monthly check go from $1,658 to $1,713.

The standard SSI payment will go from $603 to $623 per month for an individual, and from $904 to $934 for a couple.

The average monthly check for a disabled worker will rise from $947 to $979.

Eleven million taxpayers will pay higher taxes next year because the maximum amount of Social Security earnings subject to the payroll tax will rise from $94,200 to $97,500. In all, an estimated 163 million workers will pay Social Security taxes in 2007.

The $33 per month average monthly increase for Social Security retirees in 2007 compares with a $39 rise for 2006.

Part of the 2007 gain will be eaten up by a $5 increase in the payments retirees must make for Medicare Part B insurance, which pays for their doctors’ visits and other outpatient care.

The increase will push the monthly premium for most Medicare recipients to $93.50, a rise of 5.6 percent. But that is down from the double-digit increases over the past three years when health care costs far outpaced overall inflation.

About 1.5 million Medicare beneficiaries, those making more than $80,000 annually, will pay an additional $12.50 to $68.60 per month above the $93.50 premium. As part of the 2003 drug benefit law, higher-income Medicare patients for the first time will face a larger premium based on a sliding scale.

“Seniors are being asked to foot more and more of the bill while the larger issue of controlling runaway health care costs languishes largely ignored in Washington,” said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare.