Social Security Increase for 2009 'COLA', SSDI and Medicare Premiums

There is good news, better news and bad news for Social Security recipients, be it the retired or those receiving disability income (SSDI). The government announced today a Social Security benefit increase for 2009 - a cost of living allowance (COLA) -- of 5.8 percent. Compared to recent years, where the Social Security increase remained in the 2 percent range while medical premiums skyrocketed, this translates into a tangible gain, be it for a bag of groceries or coverage of a modest utility bill. An average recipient will receive approximately $60. To calculate your Social Security increase for 2009, multiply 5.8 by your gross benefit (before deductions).

Social Security Increase for 2009 and Medicare Premiums

As important as the Social Security benefit increase for 2009 is the issue of Medicare premiums. Welcome relief is that these premiums will remain the same in 2009, now at $98.60. In recent years, many retirees and SSDI recipients either lost money or saw only a few dollars gain despite the annual COLA because of rising Medicare premiums.

This loss is combined with a loss of purchasing power that many Americans are feeling but that disproportionately affect the poor and those on fixed incomes. Seniors and SSDI recipients maintain 51 percent less purchasing power than in 2000, according to AARP.

Additionally, there will be a 24 percent increase in Medicare part D, known as the Prescription Drug Plan. Some seniors and the disabled will qualify for help for this premium and related co-pays, but note that assistance for Medicare part D may not be automatic in 2009 even if received in prior years. Both retirees and SSDI recipients should check medicare.gov or call the Medicare office to apply for assistance.

Why the Social Security COLA 2009 was less than expected?

The Social Security COLA is based on cost-of-living indexes or Consumer Price Index data for urban and clerical workers. (See Resources for how the Social Security COLA is calculated). Therefore, the Social Security increase for 2009 was anticipated by some to be over 6 percent this summer --but the rate dropped a bit due to economic changes in August and September.

Essentially the Social Security increase may not accurately reflect economic trends for the upcoming year. Given that people are now buying less and spending less on leisure materials and housing, combined with lowered fuel costs/demand the last weeks, the cost-of-living index is lowered from highs seen in 2008.

Subsequently, seniors and the disabled have been hurt with inflation long before the 2009 Social Security COLA goes into effect. While the Social Security increase for 2009 is welcome relief for recipients, who will see the increase January 2009, many retirees and the disabled continue to struggle with meeting their most basic needs. Some tips for reducing debt and making the most of the Social Security increase can be found at Market Watch .

Sources

Background knowledge

seniorjournal.com/NEWS/SocialSecurity/2008/20080916-SocialSecurityCOLA

www.ssa.gov/cola/