WASHINGTON – Declining inflation in the wake of a slowed economy has reduced the cost of living increase Social Security recipients will receive in 2002, the head of the Social Security Commission said Friday.
The 2.6 percent cost-of-living adjustment in monthly checks next year will translate into an extra $22 a month for the average retiree, said Larry G. Massanari, acting commissioner of the Social Security Commission. The COLA is down from 3.5 percent this year--and Massanari said that's a good thing.
"Today's news tells us that inflation continues to be low, which is certainly good news for the elderly and disabled," Massanari said Friday.
Beginning in January, Social Security recipients will receive $874 on average, compared to $852 this year. Low income beneficiaries will get at maximum $14 extra, boosting their incomes to $545 per month. Low income couples will receive $21 to $817.
Fifty million Americans receive Social Security benefits. The COLA helps to offset the eroding buying power of the dollar against rising prices and is tied to the Consumer Price Index, a basket of prices for consumer goods that the government calculates to measure inflation.
The extra cash won't go far. The government also announced that Americans who pay Medicare premiums will see their monthly cost rise by $4 a month next year to $54. Premiums are deducted from Social Security checks to help cover doctors' office visits.
The premium increase is not linked to the COLA. It is legally mandated and reflects higher health care costs. The hike takes effect Jan. 1.
The 2002 COLA is about average. Except for this year's 3.5 percent increase, yearly adjustments have remained at or below 3 percent since 1993. In the late 1970's when double digit inflation rocked America, the cost-of-living adjustment rose to double digits, reaching 14.3 percent in 1980.
The administration also announced that those who pay into Social Security will see an increase in the maximum annual earnings subject to taxes. Americans will be taxed up to $84,900 of their income from $80,400. That increase affects about 10.5 million of the 154 million workers who pay Social Security taxes.
The Associated Press contributed to this report.