For a second consecutive year, Social Security recipients won't receive a cost-of-living adjustment (COLA) in 2011, according to the Social Security Administration.
The news was widely anticipated. Social Security has had an automatic annual COLA feature since 1975, which is determined by the third quarter Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In the third quarter of 2008 -- just before the economy crashed -- the CPI-W spiked temporarily, the result of a big increase in energy prices.
The result was a whopping 5.8 percent boost in Social Security benefits for 2009 -- a raise that was especially generous considering the near-absence of inflation in the post-crash economy. Seniors on Social Security or disability benefits also received a one-time payment of $250 under the 2009 stimulus.
Social Security payments can't fall under federal law, so benefits were held level in 2010, and will continue that way until the CPI numbers exceed the 2008 CPI-W index level. Today's final third quarter CPI report determines that payments will stay steady again in 2011.
While it's disappointing news for seniors, it's important to keep the COLA news in perspective. See my post at Reuters on why Social Security COLA complainers should settle down.
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