Social Security COLA Freeze is Not the Problem

For the second consecutive year, seniors will not get a cost of living adjustment in their Social Security checks for 2011 [see USA Today, “No Social Security Benefits Boost Expected for 2011“).  This will certainly become an election year issue, with the parties accusing each other of not caring about the welfare of

seniors.  

Politics aside, it makes sense from an inflation standpoint.  There has been no aggregate inflation for two years now.   And lest we forget that seniors on Medicare Part D received a rebate check in the summer of $2

50 per person to cover the “donut hole” in the program (a married couple on Medicare Part D received $500). 

Of greater concern, however, is that from reading some newspaper articles, it appears that the lack of a COLA boost is the difference between surviving and sinking for some families.  What gives here?  If seniors do not receive a COLA of, say, $50 of $100 a month, does that mean they will be impoverished for life?   This illustrates a bigger picture that working baby boomers and later generations shouldn't ignore: saving for retirement is crucial.  It is not enough to rely on Social Security, the HHS secretary, the president, or Congress to provide the standard of living to which people aspire.

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Comments (3)

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  1. JOHN N HART says:

    FYI

    SOCIAL SECURITY BUDGET=738 BILLION
    DEPT OF DEFENSE BUDGET=738 BILLION

    SENIORS WHO GET SOCIAL SECURITY “PAID INTO” SOCIAL SECURITY ALL THEIR WORKING YEARS..AND NO COLA

    DOD/HALLIBURTON/ETC WASTED FUNDS IN IRAQ ON ROADS,BRIDGES,INFRASTRUCTURE,ETC 200 BILLION ..WHAT IS USA GOING TO GET FOR THAT?? MORE INSTABILITY IN IRAQ ..AND POSSIBLE RETURN TO OLD IRAQ IDEALS..

    THE AMERICAN SENIORS ARE ALWAYS LAST ON LIST..

    ghengisjohn

  2. charlie says:

    There is another factor in the non-COLA equation – Medicare Insurance Premiums. Most Medicare recipients pay $96.40 / month for their share of Medicare insurance. In 2010 that premium was scheduled to increase 15 percent to $110.50. Because there was no COLA that increase was deferred. There will likely be another premium increase in 2011, and another in 2012. When the Social Security recipients finally get their COLA, its will most likely be entirely consumed by a large increase in the Medicare insurance premium.

    See http://www.medicare.gov/Publications/Pubs/pdf/11444.pdf for information on the 2010 Medicare premium increase.

    NOTE: I have posted the message above on other blogs.

    I agree on the need to save and invest for retirement. But it does not help when many seniors investments were severely harmed in the financial meltdown and the same time their SS COLAs were frozen.

    I was fortunate having converted my IRA to cash before the meltdown and then reinvesting near the bottom.

    The other issue if one is fortunate enough to have a pension, those are not protected against inflation. Most are fixed for the life of the pensioner so there value decreases at the annual inflation rate.

  3. Mary Ann says:

    Interesting to note that for the first time in how many years, the employee contribution to social security has been sliced by 2%. I have been doing payroll and taxes for quite a few years and I have not seen this one before. Why would the government do this and then complain about social security going unsolvent. And now, seeing that seniors are not getting an increase again just does not make sense to me. I have quite a few years before I will be of age but I can sympathize with seniors. I too, will be one sometime. So this is not an extension of the Bush tax cuts, but something else. Mean while our taxes are being shifted to somewhere else. And I have not seen any of this mentioned in the media. What gives?