New York For seniors like Harry Thaw, the planned 2.1 percent increase in Social Security benefits next year holds little promise of making life much easier.
Thaw, 78, a retired handyman, stops almost daily at the city-subsidized Encore Senior Center in midtown Manhattan, N.Y., for the hot lunch, which costs $1.
Every increase in the rent on his apartment means less for other things, like food and clothes, he said. Though he's not ill now, rising drug prices scare him.
"It's harder and harder to pay for anything," said Thaw, who lives on Social Security and a small pool of savings. "I have to live very frugally."
Frugality is the watchword for many of the nation's elderly who survive on fixed incomes.
Federal Reserve policies to keep interest rates low have meant seniors are earning very little on savings in the bank accounts and money market funds they tend to favor. And while inflation has been moderate for the past couple of years, the prices of goods and services important to the elderly -- including medical care and fuel for home heating and cooling -- have risen rapidly.
Social Security benefits, which are adjusted annually for inflation, are tied to the Department of Labor's Consumer Price Index, which covers a range of products and services.
The Social Security Administration recently announced that beneficiaries would get a 2.1 percent cost-of-living increase next year, providing an extra $19 a month for the typical retiree. For 2002, the increase was just 1.4 percent.
The latest adjustment will raise the average monthly benefit for a single retiree to $922 from the current $903. For couples, checks will increase to an average of $1,523 a month from $1,492.
But for many older Americans, part of the gain will be wiped out by a 13.5 percent increase in Medicare premiums that also takes effect next year. Premiums will rise $7.90 a month to $66.60.
"They give with one hand and take with another," complained Abe Goldberg, 72, a retired New York textile salesman who relies on Social Security and disability checks from the Veterans Administration.
He's also upset at the low rates available on savings.
"That just have to increase the interest rates," Goldberg said. "It's like 1 percent, and that just isn't enough."
About one-third of Americans 65 and older count on Social Security for 90 percent or more of their income, according to David Certner, director of federal affairs for the seniors' advocacy group AARP in Washington, D.C.
"That's all they have, so the cost-of-living adjustment becomes critical to them," Certner said.
He added that Social Security is about the only asset retirees have that has inflation protection. If it weren't there, retirees' spending power would be cut drastically over time.
"It's supercritical as people age and their other assets are being spent down," Certner said.
There are, of course, seniors around the nation who are doing better because they have more resources, including pensions and company-paid health benefits.
Nellie McCannon, 85, a retired University of Wisconsin professor, says a good pension and savings have allowed her to live comfortably and continue to travel, although she's a careful spender.
"I'm still a conservative person when it comes to buying things," she said. "We grew up in the Depression. We count pennies."
But McCannon, who has an apartment in the Wyndemere retirement community in Wheaton, Ill., said some of her senior acquaintances were hurt financially by the 2000-2002 bear market and low interest rates.
"Some people are going on fewer of our trips," she said. "We've even had a couple move from two bedroom to one bedroom units to save money."
Dallas Salisbury, chief executive of the Employee Benefit Research Institute in Washington, D.C., said low-income retirees are much more dependent on Social Security than those in higher income brackets.
Social Security benefits account for 42 percent of the income of the average retiree 65 and older, but 90 percent of the income of the poorest retirees. The rest is made up of pensions and annuities, personal savings and income from jobs.
Salisbury noted that next year's Social Security inflation adjustment of 2.1 percent is higher than current interest rates on savings accounts. The rate on one-year certificates of deposit currently averages 1.56 percent nationwide, according to bankrate.com.
"The Federal Reserve has been able to control interest rates, but it hasn't fully managed to do away with inflation," he said.