2.7% Social Security Boost for Seniors — Sort Of

The Social Security Administration today said that monthly benefits will rise 2.7% next year, or an average of $25 for each retiree, but much of that increase will be offset by a rise in Medicare premiums.

In separate economic news, the government reported a modest increase in consumer prices in September and a drop in residential construction activity.

The annual cost of living increase, which is pegged to changes in the government’s Consumer Price Index, begins in January for nearly 50 million Social Security beneficiaries. The average monthly benefit will rise to $955 from $930.

However, for many retirees, almost half of next year’s increase in Social Security benefits will be consumed by a previously announced rise in Medicare healthcare premiums. The monthly premium for physician services, outpatient hospital services and other services and medical equipment will rise $11.66 to $78.20 next year, the Department of Health and Human Services announced last month.

“More should be done to prevent erosion of the Social Security [cost of living adjustment] from sharply rising healthcare costs,” William D. Novelli, chief executive officer of the American Assn. of Retired Persons, said in a statement. “But the largest COLA since 2000 is welcomed today by Americans receiving Social Security.”

In a separate report, the Labor Department said today that the Consumer Price Index for September rose 0.2%, mostly as a result of higher lodging costs. While rising crude oil future prices have made headlines, energy costs paid by consumers in September actually fell 0.4%, marking the third consecutive monthly decline.

Excluding volatile energy and food items, the core consumer price index rose 0.3% in September — higher than many analysts had expected.

Despite rising prices, the increases seen in September indicated that inflation was relatively tame and in line with forecasts, economists said.

“This [report] confirms inflation remains steadfastly under control despite rising oil prices,” Peter Morici, a University of Maryland economist, said in a statement.

On the housing front, the Commerce Department said today that new residential construction activity in September dropped by a larger than expected 6.0% from the previous month to a seasonally adjusted annual rate of 1.89 million units.

Economists said that construction in Florida and across the Southeast, where the majority of the nation’s new homes are built, might have been disrupted by a series of hurricanes that swept across the region.

However, residential building permits, an indicator of future construction activity, rose by a stronger than expected 1.8% in September to a seasonally adjusted annual rate of 2 million permits.