Social Seurity Payments Will Remain Flat In 2011
The after-effects of the Great Recession are about to squeeze retirees where it hurts: the monthly Social Security check.
If you have not yet heard, for the second consective year, seniors won’t get a Social Security cost-of-living raise in 2011. A recent article in retirementrevised.com explains the rationale behind the governmment's decison to keep social security payments at their present levels.
By law, Social Security passes along an annual cost of living adjustment-or COLA-to recipients. The increase is tied to a broad measure of inflation in the economy and, up until 2010, a year had not gone by since Social Security was created in the 1930s without a COLA.
The situation might look like a wash at first glance; if consumer prices are down, seniors don’t need a raise, right? But retirees are impacted disproportionately by a sub-set of prices that tend to rise more quickly than inflation in the broader economy-health care, energy and transportation. They’re also grappling with the bad timing of falling home values and investment losses at a time when many need to tap those assets.
The result is that the vanishing COLA will squeeze many retirees hard. Social Security provides, on average, about 39 percent of income for retired households, according to AARP. More than 50 million people receive benefits.
A general decline in the financial picture of seniors is well underway; a recent survey by the Pew Research Center showed that more than a third of seniors have cut their household spending in the past year; nearly 40 percent said the recession has caused stress in their families; a majority (56 percent) said the recession “probably will make it harder for them to take care of their financial needs in retirement.”
