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No social security COLA for 2011

Print Posted by Andrew Chan October 15, 2010 02:20 PM

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The Social Security Administration (SSA) recently confirmed that there will not be an automatic cost-of-living-adjustment (COLA) for those who receive monthly Social Security and Supplemental Security Income benefits in 2011.

Under current social security laws, Social Security and Supplemental Security Income benefits increase automatically each year based on the inflation measure known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Each prospective year’s COLA is determined based on the change in the CPI-W from the third quarter of the prior year to the current year’s third quarter. Therefore, the COLA for 2011 is based on the change in the CPI-W from the third quarter of 2009 to the third quarter of 2010. Since there was no increase in the CPI-W for that period, there would be no COLA increase for 2011.

The lack of an increase for 2011 may not come as a surprise to many, especially since there was no increase for 2010. According to the SSA, this would only be the second time since 1975 (when COLAs went into effect) that an automatic COLA will not be made.

In addition to holding Social Security and Social Security Income benefits flat for 2011, the lack of an automatic COLA increase also prevents other amounts from increasing. For example, the maximum amount of earnings that are subject to Social Security taxes for 2011 will remain at the current 2010 amount of $106,800 dollars. Also, the retirement earnings test exempt amounts for 2011 remain unchanged. If you will not reach your Normal Retirement Age (NRA) anytime during 2011, you can year $14,160 dollars before your Social Security benefits are reduced. If you will reach your NRA during 2011, you can earn $37, 680 dollars for the months in 2011 prior to reaching your NRA, before your Social Security benefits are reduced.

For more information, visit the SSA’s web site at http://www.ssa.gov/.

For additional information about the 2011 COLA, go to http://www.socialsecurity.gov/cola/.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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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 principal at Forteris Wealth Management which is an independent, fee-only firm with offices in Framingham and Purchase, NY. She advises clients on investing, education funding, taxes and retirement planning. She has a BS from Worcester Polytechnic Institute and an MBA from Boston University and she is a Certified Financial Planner.

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.