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COMMENTARY | Several of my clients are retired and receive social security benefits. They, along with all the other recipients, were upset that they did not receive any increase in benefits for 2010 or 2011. The last increase received was in 2009 and was a significant 5.9 percent.
In September, 2010, there was a rumor in being spread through emails, that the democrats and the government had suspended the cost of living adjustments (COLA) which allows for the increase in payment amounts. Many of my clients and readers had contacted me then, asking if that was indeed true. No such action had taken place. Law governs increases in social security payments, and if anything, since 1986, the law has made the increases more generous.
The Bureau of Labor Statistics is the agency responsible for collecting and providing the data that the United States government and its agencies will use to calculate benefits. That law states that the index to be used is the CPI-W, which is the consumer price index for urban wage earners and clerical workers. The relevant period is the average of the months in the third quarter of each year. That is July, August and September. If the average is lower than the previous year there will not be an increase in benefits and the previous year will continue to be the "base" year. If the average is higher, then a benefit is paid. In 2007, the average of the CPI-W for the third quarter was 203.6 compared to 215.6 in 2009. This resulted in the 5.9% increase in benefits paid for 2009. In 2009 and 2010, the average of the index in the third quarter was less than 215.6, and that is why nobody received a COLA increase.
This year the CPI-W index has been between 3 and 4 percent higher than last year. This bodes well for an increase of approximately 3.6 percent in social security benefits for 2012. Inflationary pressures would have to evaporate within the next few weeks in order for the COLA to be less than 1.5% and that is unlikely.
I am suggesting to my own clients who receive social security benefits that they plan on receiving at least a 3 percent raise, if not closer to 4 percent.
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