Inflation prompts boost in 2001 benefit checks

WASHINGTON - Retirees will get the biggest cost-of-living increase in their Social Security checks in nine years - an average of $29 a month - beginning in January.

The cost-of-living announcement, affecting 45.2 million Americans getting Social Security checks, came Wednesday, just weeks before a hotly contested presidential election in which senior votes could make the difference in several crucial states.

The 3.5 percent boost - an adjustment the Social Security Administration always announces in October - is aimed at preventing rising inflation from eroding beneficiaries' buying power.

''I'm always glad to get a raise,'' said retiree Robert Simmons, 81, of Pendleton, Ind. ''In 1936, when my Social Security card was made out, I thought I'd never live long enough to collect a dime. I've been blessed by having it.''

The elderly are the segment of America most likely to vote, and of the five states with the largest percentage of people 65 and over in their populations, four - Florida, Iowa, Pennsylvania and West Virginia - are close battlegrounds in this election. Other states with large senior populations such as Arizona, Arkansas, Michigan, Missouri and Ohio are also very competitive.

Texas Gov. George W. Bush, the Republican presidential nominee, and Vice President Al Gore, the Democrat, have repeatedly clashed over Social Security. Bush proposes allowing individuals some control over how to invest their retirement funds, while Gore says that would threaten the long-term solvency of the nation's huge retirement system.

The annual adjustment is tied to the government's estimate of increases in consumer prices.

''Inflation is one of the worst enemies of the elderly,'' said Social Security Commissioner Kenneth Apfel. ''The past eight years, which have seen low inflation rates and a strong economy, have been particularly good for the elderly.''

The 3.5 percent increase was the largest since a 3.7 percent rise in 1992. It means the average monthly check for retirees will rise to $845 next year, up from $816 this year.

That compares with an increase of 2.4 percent for 2000, which translated into an average of $19 a month more for retirees.

While many seniors complain about the rising costs of heating their homes, of more concern to them are rapidly rising costs for medical care, economists say.

For the first nine months of this year, costs for medical care including prescription drugs have been rising at an annual rate of 4.5 percent, compared with a 3.7 percent increase for all of 1999.

''Any additional income is a plus,'' said June Meadows, a 67-year-old retiree from Edgemere, Md.

''We're very fortunate, we have a prescription drug plan. If not, it would be a burden because of my husband's illness. One of his prescriptions cost $1,000 for two weeks,'' she said.

Simmons said his insurance plan has buffered him from rising medical care costs, but both he and Meadows said they worry about those less fortunate. And while they would like to see soaring energy costs go down, Simmons and Meadows said that hasn't strained their lifestyles.

When they go to the polls next month, Simmons said he'll probably vote for Gore and Meadows hasn't decided.

In addition to retirement checks, Social Security payments will increase for disabled workers and families whose breadwinners have died.

The maximum monthly payment for the 6.3 million low-income individuals receiving Supplemental Security Income, known as SSI, also will rise by 3.5 percent. That will boost the maximum monthly SSI check by $18 to $530. For a couple, the SSI maximum goes up $27 to $796. Increased payments to SSI recipients will begin Dec. 29.

Separately, the Department of Health and Human Services announced that the monthly Medicare premium deducted from most elderly and disabled Americans' Social Security checks for insurance coverage of doctors' office visits will increase by $4.50 to $50 in 2001. The increase, which takes effect Jan. 1, reflects higher health-care costs and changes in Medicare law. It is not based on the cost-of-living adjustment.

Since 1975, the benefit cost-of-living adjustment has been automatic, requiring no vote by Congress. It is calculated based on changes in the Labor Department's Consumer Price Index - the government's inflation yardstick - from the third quarter of one year to the corresponding quarter of the next.

While overall inflation is rising, it is still moderate compared with other periods. Double-digit inflation in the late 1970s, for example, drove the cost-of-living increase up to 14.3 percent in 1980.

Social Security also announced Wednesday that for working Americans, the maximum annual earnings subject to Social Security taxes next year will rise to $80,400 from $76,200. That limit, along with the Social Security tax rate of 6.2 percent, is set by law. Thus, the maximum Social Security tax paid by workers in 2001 will be $4,985.

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