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Leslie Bonacum
Neil Allen

Social Security Beneficiaries Get Modest Increase

(RIVERWOODS, ILL., October 21, 2002) – Social Security beneficiaries in 2003 will see the third-lowest increase in their monthly checks in the last 25 years, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 1.4 percent will be applied to this coming year’s benefits, starting with December 2002 benefits, which are paid in January 2003. In the last quarter century, only 1987 and 1999 have seen lower increases, with benefits rising 1.3 percent in both of those years.

The 1.4-percent cost-of-living adjustment, or COLA, will produce an estimated average monthly benefit of $895 for all retired workers in 2003, $13 a month more than in 2002. A typical married couple, both receiving benefits, can expect to find $1,483 in their monthly benefit checks in 2003, $20 more than the comparable 2002 benefit, while the average widow or widower will receive an average benefit of $862, an increase of $12.

The maximum monthly benefit payable to an individual reaching full retirement age, which is age 65 and 2 months for those born in 1938, will be $1,741. This is $81 more per month than what was payable to someone retiring at the full retirement age of 65 in January 2002, and $20 more than the maximum benefit of $1,721 payable to someone born in 1938 who still wishes to retire on reaching age 65 in 2003.

Housing Costs Offset Declines in Energy

The increase is largely driven by an increase in housing costs and, to a lesser extent, increases in the costs of apparel and medical care since last September. However, increases in these areas were largely offset by declines in energy costs, according to Avram Sacks, JD, CCH Social Security analyst.

"The magnitude of the increase was fairly accurately forecast by the Social Securities Trustees last March," said Sacks. "At that time, they predicted a 1.3- percent increase, only one-tenth of a percent lower than the actual figure based on the rise of the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 2001 through the third quarter of 2002."

Earnings Limits Also Rise

The amounts that certain Social Security beneficiaries can earn without having their benefits reduced – "Retirement Earnings Test Exempt Amounts" in Social Security terminology – also will go up next year.

Workers under full retirement age who are receiving benefits can earn up to $11,520 in 2003, or $960 per month, without having their benefits reduced. This is an increase of $240 annually over the 2002 limit.

A modified test applies to workers who reach full retirement age in 2003. In the months before they reach full retirement age, these individuals may earn up to $2,560 per month without having their benefits reduced. Once they reach age 65 and two months, benefits are no longer subject to any retirement test.

"This is a modest increase of $60 over the 2002 monthly limit for these workers," Sacks noted.

An "earnings test" for beneficiaries at full retirement age through age 69 was abolished by legislation in 2000. Beneficiaries age 70 and older have not been subject to benefit reductions based on earnings since 1983.

COLA Affects Many Benefits

The Social Security COLA is applied to several types of benefits: retirement, disability, survivors – such as children and widow(er)s – and to the maximum family benefit, which is the maximum that can be paid if more than one family member is receiving benefits based on one wage earner’s account.

It also affects what are known as "transitional" benefits – a special calculation applicable to those who reach ages 82 to 86 in 2003. It also applies to "special age 72" benefits, which are limited benefits paid to certain workers born prior to 1900 and their spouses or surviving spouses in cases where the worker is not credited with enough "quarters of coverage" to qualify as "fully insured," under the Social Security program, according to Sacks.


CCH INCORPORATED, Riverwoods, Ill., is a leading provider of Social Security, tax, pension and benefits law information for attorneys, accountants and human resources professionals, including the Social Security Reporter, Unemployment Insurance Reports, Payroll Management Guide, Pension Plan Guide and Employee Benefits Management. CCH also provides tax and business law information in print and electronic form for accounting, legal and health care professionals. CCH is a wholly owned subsidiary of Wolters Kluwer North America. The CCH web site can be accessed at and the CCH human resources site is

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