Retirees will not receive a Social Security cost-of-living increase in 2010, the Social Security Administration announced today. This will be the first year without a boost in Social Security payments since automatic increases for inflation went into effect in 1975.
Social Security payments are currently tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, which did not increase between the third quarter for 2008 and 2009. Existing Social Security recipients will receive the same amount as last year, under current law. “Last year when consumer prices spiked, largely as a result of higher gas prices, beneficiaries received a 5.8 percent cost-of-living adjustment, the largest increase since 1982,” says Michael Astrue, Commissioner of Social Security. “Social Security is doing its job helping Americans maintain their standard of living.” The maximum amount of earnings subject to the Social Security tax will also remain at $106,800.
To counteract the stagnant retirement benefits, President Obama announced his support for a one-time $250 payment for seniors, veterans, and people with disabilities yesterday. Under the proposal, checks would be mailed to 49 million Social Security beneficiaries, 5 million Supplemental Security Income recipients, 2 million veterans, 500 thousand railroad retirement and disability beneficiaries, and about 1 million public-employee retirees. The amount is equivalent to a 2 percent increase in benefits for the average Social Security recipient and would cost $13 billion. Only one payment would be allowed per person.
The measure would extend for an additional year a provision of the American Reinvestment and Recovery Act which distributed $250 economic recovery payments to seniors in May 2009 at a cost of $13.7 billion. “These payments will provide aid to more than 50 million people in the coming year, relief that will not only make a difference for them, but for our economy as a whole, complementing the tax cuts we’ve provided working families and small businesses through the Recovery Act," says Obama in a statement. "This additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis.” Obama's proposal is similar to several bills currently being considered by Congress.
The earnings limit for Social Security recipients who are younger than their full retirement age (age 66 for people born in 1943 through 1954) will remain $14,160 in 2010. After that amount, 50 cents of each dollar earned is temporarily withheld from Social Security checks. For Social Security recipients turning 66 in 2010, the earnings cap is raised to $37,680 between January and the month the worker turns 66. Workers who earn more than that will have 33 cents of each dollar temporarily deducted from Social Security payments. Once beneficiaries reach their full retirement age there are no penalties for continuing to work while claiming Social Security. Employees who had some or all of their Social Security payments withheld due to earnings may have their benefits recalculated to a higher amount when they reach their full retirement age to reflect their increased lifetime earnings.