Update: Good news for the millions of Americans who rely on Social Security – they will be getting a raise in 2012, the first time since 2009. The Social Security Administration (SSA) announced that the cost of living allowance (COLA) increase for 2012 will be 3.6%. According to SSA, the average monthly benefit for retirees will increase from $1,186 to $1,229; for individuals who receive disability benefits the average benefit will increase from $1,072 to $1,111. Click here to continue reading about the 2012 Social Security COLA increase…
For the second year in a row people who rely on Social Security will not be receiving a cost of living increase. This is only the second time since the cost of living adjustment (COLA) was adopted that recipients have not received an increase.
The reason Social Security benefits will not be adjusted in 2011 is that inflation has been too low. The whole premise behind the COLA is that benefits are adjusted for inflation so recipients can keep up with rising prices. If there’s no inflation, there’s no need for an increase. The most recent inflation numbers published by the Labor Department shows that prices are lower than they were in 2009, the last time Social Security benefits were increased.
According to the Social Security administration, the COLA in 2009 was the largest seen in 27 years at 5.8 percent. The increase in 2009 was so large because of gas prices that sky-rocketed in the summer of 2008. When gas prices fell, so did the overall inflation rate. While the government can’t decrease Social Security benefits if there is deflation (when prices are dropping), they can choose to not give a COLA increase, which has been the case for 2010 and looks to be the case for 2011.
Possible Bonus Payment to Help Retirees Who Rely on Social Security Benefits
To help retirees who rely on their Social Security benefits to help with living expenses, Congress will be voting on a $250 bonus payment for Social Security recipients to help make up for the fact that Social Security benefits will remain unchanged for the second year in a row. An update will be provided once the bill has been voted on.
No Social Security COLA Means No Increase in Medicare B Premiums
One silver lining to no cost of living increase is that Medicare Part B premiums will not go up for existing enrollees. A small percentage of Medicare Part B participants will pay higher premiums, including people who have Medicare Part B but who are not yet collecting Social Security benefits, people who are considered “high income” and people who are just now enrolling in Part B. However, a “hold-harmless” provision protects current participants from rate increases if their Social Security benefits don’t increase, so no cost of living increase for Americans receiving Social Security retirement benefits also means no Medicare Part B premium increase either.
For more information on cost of living increases and Social Security benefits please visit Social Security Online: Cost of Living Adjustments.