Social Security Beneficiaries Get Larger-than-expected Increase

(RIVERWOODS, ILL., October 14, 2005) – Social Security beneficiaries in 2006 will see a relatively large 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 4.1 percent will be applied to this coming year’s benefits, starting with December 2005 benefits, which are paid in January 2006. This is the largest annual increase since 1991.

The 4.1-percent cost-of-living adjustment, or COLA, will produce an estimated monthly benefit of $1,002 for all retired workers in 2006, $47 a month more than in 2005. However, $10.30, or 22 percent, of that increase will be eaten up by a rise in the premium paid by beneficiaries enrolled in Medicare Part B in 2006. With a total monthly Medicare Part B premium of $88.50 in 2006, Social Security beneficiaries enrolled in Medicare Part B will see that average $47 benefit increase reduced to $36 after rounding required by law.

A typical married couple, both receiving benefits, can expect to find $1,648 in their monthly benefit checks in 2006, $74 more than the comparable 2005 benefit, while the average widow or widower living alone will receive an average benefit of $967, an increase of $47. 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 8 months for those born in 1941, will be $2,053. This is $114 more per month than what was payable to someone retiring at the full retirement age of 65 and 6 months in January 2005 and $92 per month more than the maximum benefit of $1,961 payable to someone born in 1941 who still wishes to retire upon reaching age 65 in 2006.

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.

Energy Costs Drive Increase

“The increase is largely driven by an increase in energy costs, which accounts for approximately 60 percent of the increase in the consumer price index over the past 12 months,” said Avram Sacks, J.D., CCH Social Security law 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 2.0 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 2004 through the third quarter of 2005.”

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 $12,480 in 2006, or $1,040 per month, without having their benefits reduced. This is an increase of $480 annually over the 2005 limit.

A modified test applies to workers who reach the full retirement age of 65 and 8 months in 2006. In each month before they reach full retirement age, these individuals may earn up to $2,770 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 $120 over the 2005 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.

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 $860, an increase of $30 from 2005.

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 2006, 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 $620, an increase of $30 over the 2005 limit.

SSI Earnings Limits

There is no trial work period for Supplemental Security Income (SSI) disability beneficiaries. However, if an SSI beneficiary is working, has only earnings, and doesn’t pay expenses in order to work, the person may earn up to $1,291 per month in 2006 before the person’s SSI federal cash benefits stop. The amount was $1,243 in 2005. This is based on an exclusion of $85 per month (assuming the person has no other income) for the first $85 dollars of monthly earned income, plus a monthly deduction of $1 for every $2 earned thereafter. SSI beneficiaries in states that provide a supplement to the federal SSI benefit can earn even more before cash payments stop.


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.

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