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Can you expect a Social Security raise in 2007? It depends

So, is it a raise or not?

For many among the nearly 49 million Americans who collect Social Security retirement benefits, the answer is not clear.

On the plus side, monthly retirement benefits are going up 3.3 percent next year, less than the 4.1 percent increase in 2006 but still the third largest since 1991. Rises in Medicare premiums, however, will dent if not erase that increase.

The 3.3 percent cost-of-living adjustment will produce an estimated average monthly benefit of $1,044 in 2007 or $33 a month more than in 2006, the Social Security Administration announced. The increase, effective with the January payment, also will bring the average retired married couple benefit to $1,713, up from $1,658.

However, some of that increase will be offset by a rise in the standard premium paid by beneficiaries enrolled in Medicare Part B, which is typically deducted from the Social Security benefit check and is going up from $88.50 to $93.50 a month.

And for the first time, Part B enrollees with higher incomes, about 4 percent of the total, will pay a higher premium - as high as $161.40 a month - based on their income.

Part B, also known as medical insurance, pays for doctors’ services and outpatient care. It also covers other medical services, such as physical and occupational therapy and some home health care.

Currently, the government pays 75 percent of the Part B cost and the beneficiary, through the standard premium, pays the other 25 percent.

But under a law taking effect in 2007, the government’s portion of the cost will be gradually reduced for higher-income beneficiaries until, by 2009, they will pay 35, 50, 65 or 80 percent of the total cost, depending on their income level.

Just what is higher-income beneficiary? For 2007, the government will go by your 2005 tax return, which is the most recent one available. If you are a joint filer with a modified adjusted gross income above $160,000 in 2005, or a single filer with modified adjusted gross income above $80,000, your Medicare premiums will go up unless you can show your income has dropped because of a number of special circumstances, such as a divorce or the death of a spouse.

For an explanation of the rules, check out the

Web site

By law, the increase in the standard premium for Medicare Part B cannot be higher than an individual’s cost-of-living benefit increase, so at worst the monthly Social Security check of those receiving the lowest benefits and paying the standard premium will remain the same. But the same protection does not apply to the higher-income beneficiaries.

In addition, no such law applies to any increase in the premiums for Medicare Part D, which became available only this year and pays for prescription drug coverag.

The result is that, “for the first time in history, many seniors will actually see a reduction in their Social Security checks” if they have the Part D premiums deducted from their benefit check and the premiums go up high enough, said Ralph McCutchen, chairman of TREA Senior Citizens League, an advocacy group. Part D premiums vary widely depending on the level of coverage.

“We’ve already seen how the elderly suffer when the Social Security cost of living adjustment fails to keep up with rising costs,” McCutchen said, “but it’s almost unimaginable to think what will happen to them when their Social Security checks start going down.”

The government calculates the annual Social Security cost-of-living adjustment based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. This index tracks the expenditures of clerical workers, salespersons, service workers and laborers - typically younger workers who don’t spend as much as seniors do in increasingly expensive health care, McCutchen said. His group is lobbying for the use of the faster rising CPI for Elderly Consumers, or CPI-E.