Seniors receiving their social security checks in January 2010 may be disappointed to find that for the first time in three decades they won't receive their cost-of-living adjustment. The 2-3 percent increase usually hits checks in January of each year in order to keep up with inflation; however, this year, the extra money won't be there.
Social Security adjustments are based on the consumer price index. This index looks at urban wage earners between the third quarter of the current year and the third quarter of the previous year. Unfortunately, the 2010 cost-of-living adjustment will be based on the very beginning of the financial crisis, which represents sharp drops in prices and deflation.
Analysts believe that the lack of an increase next year will hit seniors hard. Even though the checks won't shrink, seniors rely on the annual increase to help them manage other increases surrounding them, including elevated premiums for Medicare Part B. In 2009, seniors received an atypical 5.8-percent increase due to the spike in oil prices, so getting no increase the following year will be a hard pill to swallow.
There is a light at the end of the tunnel, however. To balance the lack of a cost-of-living adjustment, Democratic lawmakers introduced legislation that would provide a one-time payment of $150 to Social Security beneficiaries. They hope this will help lessen the blow some. But in reality, the eliminated adjustment is just another sign that the economy still has a long road to recovery ahead, meaning that seniors will have to take steps on their own to cut expenses and budget wisely to stay afloat.
Will you be affected by the lack of a cost-of-living increase? What steps will you have to take to adjust financially?
