After two years without seeing an increase in their Social Security checks, more than 59 million retirees and other beneficiaries can expect a bump up in benefits next year.
The Social Security trustees' annual report released last month estimates that the cost-of-living adjustment in next year's checks will be 0.7 percent. The increase, which will be announced in
October, could be higher, depending on where prices head in the coming months.
Still, experts say, retirees could see all or some of that raise eaten up by higher Medicare premiums.
News of the potential rise in benefits didn't generate much excitement last week among seniors at the Allen Center, a Baltimore senior center, although some retirees say they would be grateful for any boost.
"If it was $5 more, I would be happy," Frances McCready, 69, a retired cashier, said about her monthly benefit. "I would dance a jig."
The past two years have been "very bad," said McCready, who receives $616 a month from Social Security and about $400 working as a paid volunteer with the Department of Aging.
She said she lives with her son and his wife, who help her pay her bills.
"If it wasn't for them, no way in the world could I make it," she said.
The Social Security trustees projected the cost-of-living adjustment using inflation assumptions from December. Since then, the price of gas has spiked upward and then pulled back. If fuel prices tick up again, beneficiaries could see as much as a 2 percent increase.
The actual cost-of-living increase will be based on the inflation rate in July, August and September, and how it compares with the rate during the third quarter of 2008 — the last time inflation caused the government to award an increase.
Back in the summer of 2008, gas prices skyrocketed and Social Security beneficiaries enjoyed a 5.8 percent increase the following year— the biggest jump since 1982. But fuel prices quickly plunged, and it's taken this long for inflation to surpass that 2008 level.
In the two years that benefits remained flat, Medicare premiums also were frozen for the three-quarters of retirees with low to moderate incomes. But if their benefits go up, so will their Medicare premiums, which are taken out of Social Security checks.
"They will be very disappointed," said Web Phillips, senior legislative representative for the National Committee to Preserve Social Security & Medicare. "For the majority of seniors, if they get a cost-of-living increase in the 0.7 percent range, they won't see any benefit at all. It will all be absorbed by the rising Medicare premiums."
Phillips and other advocates for seniors say the way the government calculates inflation doesn't accurately reflect the price increases experienced by the elderly — especially in health care.
"Everything in the store whenever you go, it's another 10 cents tacked on," said Geri Kerger, a 75-year-old Baltimore resident who tries to live within the $1,049 she gets each month from Social Security. "Every premium I have to pay goes up once a year. And it doesn't just go up 10 cents. It goes up 30 bucks. It's really difficult."
Peg Downey, a 68-year-old retired financial planner, said the small inflation adjustment could mean that some seniors might have to do some more belt-tightening.
"The idea is to think creatively about the things you already have," she said.
For example, Downey said, seniors can share resources. If one person enjoys cooking and another likes to clean, they can trade housework and avoid paying someone else to do it. Or retirees can rent out empty rooms or garages, or lease an empty plot to neighbors who want to garden.
Henry Miner, 84, said he has managed to get by these past two years by budgeting carefully: cutting back on air conditioning, for example, and cooking more of his own meals instead of eating out or buying prepared dinners.
The retired administrative assistant lives on $1,200 a month that he receives in Social Security and railroad retirement benefits. He said he would be satisfied with a 0.7 percent increase.