Inflation Beats Social Security Increase 3:1
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27 October 2007:
Silver-haired surfers have reason to celebrate come January 2008. Their Social Security benefits will come in about 2.3 percent higher, or an extra $24 per month on average. There are about 50 million in the United States on benefits who will earn what the government calls a "cost of living adjustment," and another 4 million will see an increase as supplemental security income recipients.
The average Social Security check will come in at about $1,079 per month beginning in January. If you are single that increase grows to $637 a month, couples will receive $1,761 a month. Medicare premiums will increase 3 percent to $96.40 per month.
But not everyone is happy with the generous increase. The government ties the increase to its core price index which doesn't include volatile price increases for food, energy, or healthcare. The Consumer Price Index since year 2000 has grown from 169 base points to 208.5 base points in September 2007, for an actual increase of 39.5 percent during the period. Payments have increased by about 12 percent. Inflation so far for January through September 2007 is running at 6.1 percent, or the highest rate since 1982.
The Senior Citizens League determined that seniors have lost 40 percent of their purchasing power since year 2000 as a result of run-away inflation that the federal government doesn't count by using only core price index. The group determined that 5 million seniors, or 10 percent of those 65 years of age and up, live in extreme poverty.
One example could be shown with rent. Across the United States the average monthly apartment rent now exceeds the average Social Security monthly check, so for those seniors without substantial savings to draw the payment won't even cover monthly housing.
As the Wall Street stock boys cheer on $100 per barrel oil benchmark, the spike in energy won't even be included in Social Security increases for 2007 because oil was largely stable for he first half of the year.
Mark Zandi, economist at Moody's wrote to clients that Social Security recipients would feel the big squeeze. "For most households out buying gasoline and a loaf of bread, it feels like inflation is high."
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