Social Security benefits going up by 5.8 percent

An increase of 5.8 percent for Social Security benefits will be provided for 50 million people next year. This is the largest increase in more than a quarter of a century.

The Social Security Administration announced the increase which will start in January. It means an additional $63 per month for an average retiree.

It is the largest increase since a 7.4 percent jump in 1982 and is more than double the 2.3 percent rise that retirees got in their monthly checks starting in January of this year.

The typical retiree’s monthly check will go from $1,090 currently to $1,153.

Social security checks not adequate

Fatter Social Security payments may still seem inadequate to retirees damaged this year by high increases in food and energy. Retirees have helplessly watch their retirement saving assaulted by the biggest upheavals on Wall Street in seven decades.

“Right now many senior citizens are feeling depressed because things seem out of control. They feel like they are in a boat being whipped around by rough seas,” said Sung Won Sohn, an economics professor at the Smith School of Business at California State University. “Their purchasing power has been going down because of higher prices for food and energy and a lot of other things while their savings have taken a hit because of what is happening in the markets.”

Chaos in the market has continued this week with Dow Jones industrial average plummeting by 733 points on Wednesday. Early this month,
Congressional Budget Office estimated that Americans’ retirement plans have last as much as $2 trillion over the last 15months because of the market upheaval.

With all the gloomy news, retirees may take little comfort in the new cost of living adjustment. The benefit change is based on the amount the Consumer Price Index increases from July through September from one year to the next.

The increase would have been even higher, but after running ahead earlier in the year, energy costs fell in both August and September, helping to moderate the overall price gain.

Of the 164 million workers who will pay Social Security taxes in 2009, about 11 million will pay higher taxes as a result of this increase.