The 0.5 percent decrease in the CPI-W for August counterbalanced the increase for July. This is the index used to calculate Social Security benefit increases. According to the most recent figures from the Department of Labor, the year-over-year inflation figure for August is 5.9 percent.

The benefit increase, however, is not calculated based on the year-over-year change in the index over a single month. It is based on the change in the index over three months of CPI-W figures. For 2007 the figures for July, August and September were 203.7, 203.199 and 203.899, respectively. That averages to 203.60

The corresponding index figures for July and August have been 216.304 and 215.247, respectively. They average to 215.78. When you divide this year’s figure (215.78) by last year’s figure (203.60) you get 1.06.

That means Social Security benefits will increase by 6.0 percent next year--- unless there is a very large decline in the index in September.

  • If the CPI figure for September is unchanged from August, the benefit increase will be 5.9 percent.
  • If the CPI figure for September declines by another 0.5 percent--- an unusual two month decline--- the benefit increase will be 5.8 percent.

So the likely range for the benefit increase is pretty narrow--- 5.8 percent to 6.0 percent.

No figures have been announced for the Medicare Part B premium in 2009.

Related links:

Want a Good Raise? Retire. (Sunday, August 1, 2008 column on the coming Social Security benefit increase

First Follow-on: The CPI increase in July

The August CPI change--- Department of Labor Press Release

The CPI-W figures used to calculate Social Security benefit increases