By Mary Johnson
It’s official. The Social Security Administration recently announced that fifty-three million Social Security beneficiaries won’t receive any cost-of-living adjustment (COLA) in 2011 — the second year in a row. The two-year lack of COLA is unprecedented in the 35 years since the payments have been automatically adjusted.
Even though inflation increased 1.4 percent over the last 12 months, the law requires that inflation must be higher than the last quarter for which a COLA was paid. That was the third quarter of 2008, and inflation still is still minus (-.6) percentage point below that level.
When Congress returns after elections in November for a lame duck session, the House is expected to vote on whether to provide a one-time $250 payment to Social Security recipients. Last year a similar measure passed in the House, but was defeated in the Senate.
TSCL supports the legislation to provide $250 emergency payments to help seniors who are struggling to offset rising Medicare costs. But the one-time payments are not the same thing as an emergency COLA. COLAs increase monthly benefits, which grow gradually over time helping to protect benefits against a loss in buying power. The zero COLAs in 2010 and 2011 however, will result in an enormous drop in the value of lifetime Social Security income due to the loss of the compounding, even if the one-time payments pass.
According to my estimates, people with average monthly benefits of about $1,072 in 2009, and who got no COLA in either 2010 or 2011, will lose more than $10,000 in Social Security income by the end of ten years. With more than sixty percent of all seniors relying on their Social Security for at least half of their income, few people can afford to lose that kind of money.
TSCL supports not only the $250 emergency payments, but is also lobbying for legislation that would provide the income security that seniors need. TSCL is working for The Guaranteed 3% COLA for Seniors Act, introduced by Representative Eliot Engel (NY-17). The legislation would base the COLA on the Consumer Price Index for the Elderly (CPI-E), and guarantee that seniors receive a COLA of no less than 3%.
As of this writing on October 15th the Centers for Medicare and Medicaid Services has yet to release information on Medicare premiums for 2011. The Medicare Trustees estimated in their 2010 report that premiums would increase to $120.10 per month. Be watching the news and your mail for the announcement and for details in the January 2011 issue of this newsletter.
Sources: Consumer Price Index, September 2010, Bureau of Labor Statistics, October 15, 2010.