Social Security Recipients to Get 4% Hike in Jan.; $21 for Average Retiree

The nation’s 38.4 million Social Security recipients will get a 4% benefit increase in January, the second highest boost in 6 1/2 years, the government said today.

The Social Security Administration said the increase promises an extra $21 a month for the average retired worker, who now gets $516 a month from the huge pension and disability insurance program.

It said the maximum monthly benefit for a worker retiring in 1988 at age 65 will rise $61, from $838 to $899.

The exact size of the increase became official today when the Labor Department announced the change in the consumer price index for September.

Inflation 5% a Year

Higher costs for food and clothing pushed retail prices 0.3% higher last month, the department said in a report giving further evidence that the underlying rate of inflation is now pegged at about 5% a year, a harbinger of higher interest rates, higher wages and higher Social Security benefits down the road.

The Social Security Administration’s annual cost-of-living adjustment is geared to a Labor Department measure of consumer price inflation among urban workers, which advanced 4.1% over the last 12 months.

Since 1975, Social Security benefits have risen automatically each year with the consumer price index with the exception of six months in 1983 that were skipped to help bail out the system in a crisis.

4.2% Rise in 1988

The increase for 1988 was 4.2%, which had been the biggest advance since a 7.4% rise in 1982, back when higher inflation rates translated into bigger cost-of-living increases.

More than 4 million recipients of Supplemental Security Income, a welfare program for the aged, blind or disabled, will also get a 4% increase.

For the elderly and disabled, the Social Security increase will be partially offset by an extra $7.10 a month in Medicare premiums, which will rise to $31.90 starting in January. They are deducted directly from the benefits.

The agency gave the following examples of how the 4% increase will affect average monthly benefits:

--All retired workers, up $21, from $516 to $537.

--Aged couple, both getting benefits, up $38, from $883 to $921.

--Widowed mother and two children, up $42, from $1,070 to $1,112.

--Disabled worker, spouse and children, up $41, from $902 to $943.

--All disabled workers, up $20, from $509 to $529.

The maximum federal SSI payment will rise by $14, from $354 to $368, for an individual, and by $21, from $532 to $553, for a poor couple.

Cutoff Point $48,000

The Social Security Administration also announced today that the maximum amount of wages subject to the payroll tax will climb from the current $45,000 to $48,000 in 1989.

That means that the maximum tax on employees will jump by $225.30 to $3,604.80 for workers earning over $48,000 annually. Employers pay the same amount each worker pays.

This change affects about 7% of the 130 million workers covered by Social Security. The wage base, the amount subject to the tax, has gone up every year since 1971.

However, the payroll tax rate, which has been increased 20 times since Social Security started in 1937, will remain unchanged at 7.51%. But it will rise to 7.65% on Jan. 1, 1990.