Senior citizens will get a bump in Social Security payments

Steve Chiotakis Oct 19, 2011

Senior citizens will get a bump in Social Security payments

Steve Chiotakis Oct 19, 2011

Steve Chiotakis: The government said today consumer prices rose in September. But the slight uptick in inflation was mostly from food and energy, which of course matters for a lot of people, and one group in particular — senior citizens. Their monthly Social Security payments are pegged to inflation. And the government said today recipients will get a 3.6 percent cost of living increase.

Marketplace’s Mitchell Hartman is with us live to talk about it now. Good morning Mitchell.

Mitchell Hartman: Hi Steve.

Chiotakis: What does this mean for seniors?

Hartman: It’s definitely a nice boost, especially after they didn’t get any cost of living increase in the past two years. So remember 2008? Gas prices went through the roof, and that meant seniors got a big benefit increase the next year. Well, it hasn’t happened since then.

But with oil and food prices now rising pretty steadily, by law, Social Security checks have to be increased to keep up. So the average senior, who gets about $13,000 a year from Social Security — and keep in mind that’s likely to be most of their income — they’ll get another $470 a year, which is just under $40 a month.

Chiotakis: Is it enough, Mitchell, to really make a difference in their ability to pay bills?

Hartman: Well, you know, it’s helpful although it might not really offset all the rising costs that they face.

I asked Dean Baker about this. He’s an economist at the Center for Economic and Policy Research.

Dean Baker: The elderly are likely feeling it even more because the basket of goods they buy tends to go up more rapidly in price — health care, housing are larger components.

So health care inflation’s way up, but they don’t tend to buy computers and Playstations and all the things that are actually going down in price as technology improves. So Dean Baker says it all adds up to a tough squeeze for seniors.

Baker: Seniors are certainly being hit from a number of different angles. So insofar as they had fixed incomes, if they had money in the bank that they were putting in CDs they’re getting a very low interest rate on that, something they really couldn’t have expected.

Also if they were expecting to say, downsize — they had the home they raised their kids in and going to downsize and rely on some of that equity to support them in their later years — in a lot of cases that wealth disappeared.

So one more little drizzle on this cost-of-living-increase parade: next week Medicare announces premium increases for next year, and some of this bigger benefit check will likely be eaten away.

Chiotakis: Marketplace’s Mitchell Hartman, reporting for us this morning. Mitchell, thanks.

Hartman: You’re welcome.

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