Social Security, Retiree COLA Raise

Social Security recipients will receive 5.8 percent more in benefits next year, the biggest annual increase in more than a quarter century, the federal government said Thursday.

The raise, effective in January, will mean an additional $63 per month for the average retiree, bringing typical monthly payments to $1,153, the Social Security Administration said. For the average couple getting Social Security benefits, monthly checks will climb by $103 a month to $1,876.

The annual increase, known as the Cost-of-Living Adjustment, or COLA, will affect more than 50 million Social Security beneficiaries. In addition, more than 7 million people will begin receiving higher Supplemental Security Income benefits on Dec. 31.

The increase is the largest since 1982, when payments rose by 7.4 percent, and is more than double this year's 2.3 percent gain. COLAs in 12 of the past 15 years have been less than 3 percent; they've been as high as 14.3 percent, in 1980.

The adjustment, made annually since 1975, is based on the change in the Consumer Price Index from the third quarter of one year to the third quarter of the next.

The 2009 hike would have been even higher were it not for falling energy costs that left the CPI flat in September after it fell by 0.1 percent in August.

Because the COLA is based on the average monthly changes in the third period only, it differs from the CPI, which measures year- over-year changes. The CPI was up 4.9 percent nationally in September.

Both figures largely reflect volatile energy prices, as gasoline fell by 5.6 percent last month though remaining 31 percent higher than in 2007.

Food prices also were 1 percent higher in September than a month ago, bringing the 12-month increase to 6.8 percent in the region. Included is food for home consumption, which rose by 8.4 percent over the year, the largest 12-month hike in more than 21 years, said Martin Kohli, an economist with the Bureau of Labor Statistics' New York office.

Energy prices have continued to slip this month, with The Record's Marketbasket Survey showing that gasoline prices have fallen 63 cents in the past month.

Even so, gasoline is still 13.9 percent higher since last October, and heating oil has added 10.7 percent.

Editor's note: This increase is tied to the Consumer Price Index (CPI) for 2008. Since the CPI is also used to determine the annual military retirement COLA it is likely that military retirement pay will also increase by 5.8 percent in 2009. This rate increase will be the largest since 1982. This new COLA rate will go into effect in January of 2009.