Social Security Benefits: Several Crucial Specifics On Cost Of Living Adjustment

Social Security Benefits: Several Crucial Specifics On Cost Of Living Adjustment

For the 2nd year in a row people who rely on Social Security will not be receiving a cost of living increase. This is only the 2nd time since the cost of living adjustment (COLA) was implemented that recipients have not received an increase.

The reason Social Security benefits wont be revised in 2011 is that inflation has been too low. The whole premise behind the COLA is that benefits are adjusted for inflation thus recipients can sustain increasing prices. If there's no inflation, there's no need for cost of living increase. The most recent inflation numbers published by the Labor Department shows that prices are lesser than they were in 2009, the last time Social Security benefits were raised.

The COLA in 2009 was the largest seen in 27 years at 5.8%. The raise in 2009 was so large because of gas prices that sky-rocketed in the summer of 2008. When gas prices fell, so did the in general inflation rate. While the government can not decrease Social Security benefits if there is deflation (when prices are decreasing), they can choose to not give a COLA raise, that has been the case for 2010 and looks to be for 2011.

Possible Incentive Payment to Help Seniors Who Rely on Social Security Benefits

To help Seniors who rely on their Social Security benefits to help with living costs, Congress will be voting on a $250 incentive payment for Social Security recipients to help make up for the fact that Social Security benefits will remain the same for second year in a row. An update will be provided once the bill has been voted on.

No Social Security COLA Means No Increase in Medicare B Premiums

One silver lining to no cost of living increase is that Medicare Part B premiums wont increase for current enrollees. A small percent of Medicare Part B participants will pay increased premiums, including people who have Medicare Part B but who are not yet collecting Social Security benefits, people who are considered "high income" and people who're just now enrolling in Part B. But, a "hold-harmless" provision protects current participants from rate increases if their Social Security benefits do not raise, so no cost of living increase for Social Security recipients also means no Medicare Part B premium increase either.

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