Social Security Recipients Out Of Luck Again

Back in 1972 the U.S. Congress acted to protect people living on a fixed Social Security retirement income.   They recognized that after a few years of inflation in prices the buying power of Social Security recipients could be seriously lowered -- the equivalent of getting a cut in the benefit received.   And the Americans who could least afford to suffer a cut in pay are those elderly people receiving Social Security.   Their solution was to attach a cost-of-living adjustment (COLA) to the inflation rate, giving Social Security recipients a raise equal to the rate of inflation.

But that 1972 law is not going to do today's Social Security recipients any good.   According to spokesmen from the Congressional Budget Office, it looks like those receiving Social Security payments will not get a COLA raise in 2011.   This marks the second year in a row that their will be no COLA raise.

The last raise was 5.8% in January of 2009 (sparked by a jump in energy prices in 2008).   But the energy prices then fell and due to the recession there was no inflation in 2009.   That meant there was no COLA raise in January of 2010.

There has been some inflation in 2010, but a quirk in the 1972 law will prevent any COLA raise for 2011.   The law says there must be inflation over the last year in which there was inflation that precipitated a raise.   That year would be 2008 -- not 2010.   There will not be a COLA raise until inflation tops the inflation figures for 2008.

So Social Security recipients will just have to tighten their belts in 2011 (unless inflation suddenly goes out of control in the last three months of 2010 -- an unlikely scenario).   Maybe there will be a raise in 2012.