Low inflation means no Social Security COLA in 2011

FDR-era poster advertising Social Security.

Sorry, no COLA to Social Security next year, either. (Photo Credit: Public Domain/U.S. Government/Wikipedia)

Since Congress established the annual cost of living adjustment (COLA) for Social Security payments in 1975, only twice have Social Security payments actually failed to rise. According to the Associated Press, 2010 was the first year without a COLA for Social Security, and 2011 will be the second. The Social Security Administration blames the lack of a COLA on inflation rates being too low.

Congress working to make up for lack of Social Security COLA

More than 58 million American retirees and disabled people depend on Social Security, and all of them look forward to the annual COLA. In response to what will be the second straight year without a raise in benefits across the board, the House of Representatives plans a November vote on a bill that would give each Social Security recipient $250. House Speaker Nancy Pelosi hopes to move the bill through the House, but the AP indicates that there is already stiff opposition in the Senate. Such news will no doubt add to the already heavy burden many retired Americans carry. Savings and home values are still low thanks to the recession, and the cost of living continues to rise as COLAs fall by the wayside.

“We’re a little bit upset because our bills are going up and our Social Security isn’t,” said retiree Betty Dizik, 83, to the AP. Dizik’s only source of income is a $1,200 month Social Security check. And her situation is far from unique. The average Social Security check is $1,072 per month. The Social Security Administration also indicates that 64 percent of those who received Social Security compensation in 2008 depended upon it as their sole income.

The last Social Security COLA was a big one

Social Security is currently supported by a 6.2 percent payroll tax paid by workers and employers. The maximum wage cap for which the tax still applies is $106,800. With the last Social Security COLA in January 2009, payments went up 5.8 percent, the largest increase in 27 years, reports the AP. An increase in energy prices led to that abnormally large COLA.

By law, a Social Security COLA will not occur again until consumer prices rise above 2008 levels. Social Security Administration anticipates that this will occur in 2011, leading to a 1.2 percent COLA that will hit in January 2012.


Associated Press

AP coverage of COLA-less Social Security

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