Social Security COLA Could Be 0% For Next Few Years

In January of this year, people collecting Social Security retirement benefits received one of the highest cost of living adjustment (COLA) increases seen since the 1980s.  Unfortunately, that increase may be the last one you see for a few years.

If you are retired and receiving Social Security benefits, you know that your benefits are increased each year to help you keep up with inflation.  This is called a cost of living adjustment, or COLA.  The COLA is announced in October of each year and is based on the CPI-W (the Consumer Price Index for Urban Wage Earners and Clerical Workers) from the 3rd quarter of the previous year to the 3rd quarter of the current year.  Changes announced in October go into effect in January of the next year.

In 2009, retirees saw their benefits increase by 5.8%, due mainly to the high cost of gas during 2008.  This was much higher than normal, with the average increase being around 2.8%.  Unfortunately, the Congressional Budget Office (CBO) is estimating that there will be no increase in Social Security benefits for the years 2010 through 2012.

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Common Social Security Retirement Questions

As Baby Boomers are getting closer and closer to retirement, they have many questions about Social Security, such as…

Will Social Security be there for me when it’s my time to collect benefits?

For a long time the media has been telling us that Social Security is going bust. Millions of Americans depend on Social Security to fund all or part of their retirement, so this is a huge concern in our country. So do we really need to worry about Social Security going under before we start collecting our retirement benefits?

The 2009 Social Security Trustees Report anticipates that Social Security benefits paid to retirees will exceed Social Security taxes paid in by workers (and earnings on the funds in the trust) beginning in 2016.  In addition, the trust fund could be exhausted by 2037.  Once the trust fund is gone, benefits will still be paid out, but the taxes collected from people still working will only be enough to cover 76% of the benefits promised.

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Social Security Benefits Increase 5.8% for 2009

Finally some good news for retirees… Social Security benefits are being increased 5.8% for 2009.  This is the largest increase in more than 25 years!

This increase will boost the average monthly Social Security retirement check from $1,090 to $1,153.

Even more good news… for the first time since 2000, Medicare premiums will not go up in 2009.  Currently the Medicare Part B premium is $96.40 per month.

This is good news for Seniors who have seen their portfolios plunge over the last 15 months.  If possible, you should use this increase to reduce the amount you are withdrawing from your portfolio, to give it more time to recover recent losses.