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Leslie Bonacum
Neil Allen

Social Security Beneficiaries Get Increase

(RIVERWOODS, ILL., October 20, 2004) — Social Security beneficiaries in 2005 will see a moderate increase in their monthly checks, according to CCH INCORPORATED (CCH), a leading provider of tax and payroll law information and software. As a result of inflation, an increase of 2.7 percent will be applied to this coming year’s benefits, starting with December 2004 benefits, which are paid in January 2005.

The 2.7-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $955 for all retired workers in 2005, $33 a month more than in 2004. However, $11.60 of that increase will be eaten up by a rise in the premium paid by beneficiaries enrolled in Medicare Part B in 2005. With a total monthly Medicare Part B premium of $78.20 in 2005, Social Security beneficiaries enrolled in Medicare Part B will see that average $955 benefit reduced to $876 after rounding required by law.

A typical married couple, both receiving benefits, can expect to find $1,574 in their monthly benefit checks in 2005, $51 more than the comparable 2004 benefit, while the average widow or widower living alone will receive an average benefit of $920, an increase of $32. These amounts do not reflect deductions for Medicare premiums.

The maximum monthly benefit payable to an individual reaching full retirement age, which is age 65 and 6 months for those born in 1940, will be $1,939. This is $114 more per month than what was payable to someone retiring at the full retirement age of 65 and 4 months in January 2004 and $65 per month more than the maximum benefit of $1,874 payable to someone born in 1940 who still wishes to retire on reaching age 65 in 2005.

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.

Shelter and Energy Costs Drive Increase

The increase is largely driven by an increase in shelter and energy costs, which account for approximately 58 percent of the increase in the consumer price index over the past 12 months, according to Avram Sacks, J.D., CCH Social Security analyst.

"The magnitude of the increase was not expected by the Board of Trustees of the Federal Old-Age, Survivors and Disability Insurance (OASDI) Trust Fund last March," said Sacks. "At that time, they predicted a 1.1-percent increase, less than half the actual figure based on the rise of the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of 2003 through the third quarter of 2004."

Earnings Limits Also Rise

The amounts that certain Social Security beneficiaries can earn without having their benefits reduced – "Retirement 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 $12,000 in 2005, or $1,000 per month, without having their benefits reduced. This is an increase of $360 annually over the 2004 limit.

A modified test applies to workers who reach the full retirement age of 65 and 6 months in 2005. In the months before they reach full retirement age, these individuals may earn up to $31,800 without having their benefits reduced. Once they reach full retirement age, benefits are no longer subject to any retirement test.

"This is an increase of $720 over the 2004 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.

Disability Thresholds

The amount of monthly earnings in 2005 that will give rise to a presumption that a disability beneficiary is no longer disabled – that is, the amount that’s deemed sufficient to demonstrate an ability to engage in "substantial gainful activity" is $830, an increase of $20 from 2004.

Disability beneficiaries may work for as many as nine months during any 60-month period without affecting their rights to receive benefits. This is known as "trial work." In 2005, a disabled beneficiary who works will not be treated as having engaged in trial work for any month in which his or her earnings are no more than $590, an increase of $10 over the 2004 limit.


CCH INCORPORATED is a leading provider of employment law and human resources information for attorneys and human resource professionals. The CCH Human Resources web site is Headquartered in Riverwoods, Ill., CCH was founded in 1913 and has served more than four generations of business professionals and their clients. CCH is a Wolters Kluwer company ( and part of the Wolters Kluwer Legal Unit. Wolters Kluwer NV is a leading multinational publisher and information services company, with annual revenues (2003) of EUR 3.4 billion and approximately 18,750 employees worldwide. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.

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