When prices fall across much of the economy you get deflation. It's the opposite of inflation and it can be more painful than rising prices. If you doubt that, just think about the housing mess: falling home prices mean rising defaults mean . . . you get the idea.
Deflation also means seniors will almost certainly not be getting a cost of living increase this year. According to the formula the Social Security Administration uses to calculate the COLA, inflation is down about 2% this year.
Seniors are not happy about it, which is the subject of my story today.
On the flip side, that means workers will not see their Social Security payroll taxes go up next year. The cap on wages subject to Social Security is also set to inflation and, hence, will not be rising.
Comments
I heard this week, which I am trying to verify, that the social security program has gone cash flow negative for the first time. This is a direct result of many things including reduced number of wage workers and company contributions,the rate of growth(COLA, qualified recepients increasing, etc.) of expenditures by SSA and the now retiring contibutors into the SSA system. The greatest generation has sucked the well dry. The real contributors into SSA have a right to be concerned. COLA in the future will be remembered as an old arcane way of thinking due to the necessitiy of reduced spending (no one interested in our bonds).
Had the COLA increased 2.9% in January 2009 and another 2.9% in January 2010 I doubt there would have been any complaints.
Plan Administrator what good is your 5.8% when you take so much back for medicare and our secondary Insurance raises our Premiums? Your Salary is not $iooo.00 a month live on this will you !
Seniors are unhappy about not getting a COLA increase 1/1/2010 but I didn't find any of them complaining when they got a 5.8% increase 1/1/2009. The 1/1/2009 COLA was computed by comparing the average CPI-W for 3Q07 to 3Q08. Last year they dodged the events of the 4th quarter.
With a zero this year, their two-year average is 2.9%. That's more than I received working.