Tempered by low inflationary numbers, 2004’s projected increase is slightly higher than this past year’s 1.4% (See Social Security Payments See Slight Increase ). Last year’s increase netted the average retiree $13 more a month, $20 on average more for couples, according to an Associated Press report.
However, the 2.1% increase will still not be enough to keep up with escalating Medicare premiums. Health-care costs are projected to rise 13.5% next year, equaling a $7.90 a month rise in Medicare costs.
This represents a steep increase in Medicare payments for the estimated 51 million Social Security recipients since the health-care program’s inception. When Medicare began in 1967, premiums were $3 a month. Next year’s 13.5% increase is the third-largest in the program’s history, paling in comparison to the largest premium increase on record; 1988’s 38.5% and falling short of 1993’s 15.1% jump.
Social Security payments on the other hand have been adjusted automatically starting in 1975 to protect retirees’ income from being eroded by inflation. The biggest annual increase was in the double-digit inflation days of 1980 and came in at 14.3%. However adjustments in the past decade have remained below 3%.
Those still paying into the fund will be interested to know that the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $87,900 from $87,000 in 2003 – which means that about 9.2 million will pay higher taxes next year as a result.