Social Security benefits for the nation's 50 million seniors will rise 5.8 percent in January, providing the biggest cost-of-living increase in more than 25 years at a time when the nation's elderly are being buffeted by rising fuel and food costs and a weak stock market.
The typical retiree will get about $63 more a month, the Social Security Administration announced yesterday. About 786,407 Marylanders received an average of $1,090 in monthly Social Security benefits as of January 2007, according to the Social Security Administration.
The sharp rise comes after several years of lower cost-of-living adjustments and as retirees are seeing their investments battered in the stock market. This month, the Congressional Budget Office estimated that Americans' retirement plans have lost as much as $2 trillion over the past 15 months - more than 20 percent of their value - because of the market downturn.
"With the continuing increases in the cost of gas and energy and health care and food, it doesn't completely ease their burden, but every dollar counts and it's certainly a very welcome increase," said Tiffany Lundquist, a spokeswoman for AARP Maryland.
Floyd Turner's eyes widened when he heard about the increase. It's about time, he said.
"What was it last year, 2.5 percent?" asked Turner, 76, who lives at Westminster House, a senior housing facility in Mount Vernon, and calls its weekly bingo games. Turner said the boost would help him cover a recent $35-a-month rent increase. Otherwise, he didn't foresee a lavish lifestyle.
"It ain't gonna be steaks every night," he said. "Maybe a beer on Friday."
The annual cost-of-living adjustments, which started in the 1970s, are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, a measure of inflation calculated by the federal Bureau of Labor Statistics.
"The general idea is to make sure people's benefits don't get eroded by the cost of food and health care and energy prices and stuff like that," said Edward Montgomery, an economist and dean of the University of Maryland's College of Behavioral and Social Sciences.
This was the worst third quarter since 1982, Montgomery said. That year, the cost-of-living increase was 7.2 percent.
He said this year's increase was primarily driven by rising food and energy costs.
"We all know what happened to our prices at the gas pump," Montgomery said. "In some sense for seniors, this is sort of catch-up. They already had to pay out the greater amount for the utility bills and the cost of driving cars and things like that."
In addition to the cost-of-living adjustment, the Social Security Administration also announced yesterday that the maximum amount of earnings taxable as Social Security income will increase from $102,000 to $106,800. The change will affect 11 million workers, according to a news release.
Amid the collapse of the world's financial markets, the foreclosure crisis and rising joblessness, the Social Security system has received relatively little attention in the current presidential election, particularly compared with 2000, when Democrat Al Gore promised a "lockbox" to protect the Social Security trust fund, or 2004, when President Bush made a partial privatization of the system a major part of his platform.
If no changes are made, the Social Security trust fund is projected to deplete its reserves in 2041 and will begin paying out more than it collects even sooner, starting in 2017.
Lundquist said the current economic crisis underscores how important it is to shield Social Security benefits from the volatility of the stock market, because so many older adults, particularly women and minorities, rely on those funds.
"When you start to think about risking that bedrock, it really puts it in perspective," she said.
As word spread yesterday about the benefits increase, seniors welcomed the news, saying it would help them pay for basic necessities such as insurance, medication and rent.
"It's very welcome. Something good is happening in Washington," said Jim Williamson, who was walking his poodle and bichon frise along Charles Street yesterday morning.
Williamson, who declined to give his age but allowed that he was old enough to receive Social Security benefits, said the increase would help him keep his Blue Cross and Blue Shield insurance, for which the premium rose 30 percent this year.
Betty Warfield and Lorraine Capperella sat on chairs in the courtyard outside Westminster House devising exotic ways to spend their added income. Capperella, who is 54 and receives Social Security disability benefits, said she would buy new clothes and give some money to her grandchildren.
"I would probably get my Blue Cross and Blue Shield insurance back," said Warfield, 68, who dropped the insurance several months ago because the cost - $191 a month - became prohibitive. She hasn't needed it but says she feels better knowing that she has it.
"I'm in good health, but you never know," she said.
Several Westminster House residents interviewed yesterday spoke of basic economic concerns in the wake of the financial crisis of the past month and said they felt as if the prices of everything were rising and they were having trouble keeping pace.
"I like the increase, but it isn't going to do me any good," said Turner, who says that after paying necessary expenses - rent, bills and such - he's left with less than $200 a month. "So, I'll be breaking even," he said. "You do the best you can."
"Any increase is good," said James Holland, 79, who plans to use the money to pay rent and the cable bill. "I think it should be higher, but if you get anything, you should be happy."
The Associated Press contributed to this article.