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Getting SS? Plan for no "raise" in 2010

Print Posted by Cheryl Costa May 5, 2009 10:01 AM

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It was recently announced that the 50 million people currently receiving social security benefits would see no cost of living increase in their payments for 2010. This would be the first time in over 30 years that there was no such increase and it comes on the heals of a 5.8 percent increase in 2009 -- the largest increase in over 25 years.

Many people count on these year to year increases so it is important to start planning now. For example, while many people's checks will remain flat, health care and every day living expenses will almost certainly be increasing.

Why is this happening? Cost of living adjustments (COLAs) are set by a formula which is supposed to match the change in the consumer price index (CPI-W). Figures from this year are compared with figures from last year. Recently, overall inflation has been low. However, because retirees tend to consume a different "basket of goods", there have been discussions about using a different measure for the inflation adjustments -- the so-called CPI-E -- which would more accurately reflect the services and goods that retired people purchase. So far, the CPI-W continues to be used.

Finally, to make matters worse, you need to know that there might not be an increase in 2011 either. The New York Times has reported that President Obama's budget calls for no increase in 2010 and 2011 and only a 1.4 percent increase for 2012.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.