Expert: Allen - 1/9/2008

Question
Well, I'm not sure if you can answer my question or not. If not maybe you can tell me who can.
Well, this is my question.
When social security decides you get a 2.1% increase in your monthly check, what is that 2.1% of?
For example if the government decides that inflation has increased by $1000, do you get 2.1% of that $1000. I'm just wondering where they figure that we only get $20. month? I can't figure how people make it on that.
Where do they come up with the 2.1%

Answer
If the annual increase for 2008 is 2.1% and your benefit in 2007 was $1,000 a month, then your benefit in 2008 will be $1,021 per month.

The annual increase is calculated on an index specified in the law covering Social Security. It is supposed to be based on increases in the cost of living. But as you point out, it may not be a good estimate.