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Volume 10 Issue 2 - May 2009

Will There be a Social Security COLA in 2010?

In the midst of a slowing economy, Social Security recipients may not get a Cost-of-Living Adjustment (COLA) in 2010.

As mandated by law, the Social Security Administration uses a formula based on the Consumer Price Index (CPI) to determine if there will be a COLA and what its size will be. The CPI is used as a measure of price changes of goods and services related to the cost of living.  In times of high inflation, the CPI rises dramatically.  In times of little or no inflation, the CPI remains steady or goes down. 

The COLA increase for 2009 was the largest since 1982 at 5.8%.  If we look back at what happened to prices from the 3rd quarter of 2007 to the 3rd quarter of 2008 (the time period used to determine the 2009 COLA), the CPI went up because gas and energy costs along with other consumer goods spiked dramatically.  For 2010, Social Security will look at any changes to the CPI-W from the 3rd quarter of 2008 to the 3rd quarter of 2009. 

The Congressional Budget Office is estimating that, given the weak economy and price deflation recently, there will be no COLA increase for the next three years.  Remember, these are just projections. We have to wait to find out what actually happens to the economy in the coming months to see what happens with the 2010 COLA.  Your benefit may not go up, but it won’t go down. While the economy is weak, Social Security still provides the same strong financial base for retirees is has for the past 74 years. Visit the AARP website for resources and community programs that can help you prepare for the possibility of no Social Security COLA in 2010. www.aarp.org/realrelief.

For more information about the COLA, visit the SSA website at http://www.socialsecurity.gov/OACT/COLA/colasummary.html.