Social Security Administration Fails to Adjust for Inflation, Again

For the second year in a row, retirees and those on Social Security disability will not be receiving an increase in their benefits, which is usually adjusted each year for inflation. The automatic adjustments were first instituted in 1975.

To compensate, the Obama administration and House Speaker Nancy Pelosi promised a vote after the Nov. 2 mid-term elections to give recipients a one-time payment of $250. It is similar to the one President Obama attempted to pass last year, but failed.

The Social Security Administration (SSA) reported that the cause for this year's failure to increase benefits was that inflation had been too low since the last increase in 2009 (5.8 percent), the largest increase since 1981. The SSA is required to use the most recent third quarter that led to an adjustment, so the next increase will only happen if consumer prices exceed that of the summer of 2008, which is expected to happen next year. The increase, however, is projected to be only 0.4 percent in 2012.

Social Security was first introduced in 1935 and includes not only retirement benefits, but disability benefits, veterans' pensions, public housing, and food stamps. The program was designed to provide a safety net for the disabled and retirees who were unable to adequately save for their retirement or who needed to supplement their income.

Millions of people rely on Social Security for food, shelter and other basic living needs. Roughly 60 percent of retirees receiving Social Security depend on it as their primary source of income, and about one-third report that it consists of 90 percent of their overall income. The average Social Security check is approximately $1,072 per month.

Economists point out that recipients are still coming out ahead because of the huge increase of 5.8 percent they received in 2009. This may be small comfort to those who lost their pensions or retirement accounts or whose value has greatly diminished because of the financial problems in recent years. With many retirees' homes having decreased markedly in value as well, the news that a future increase will be minimal at best can only add to the continuing frustration many Americans feel as they continue to wait for the economy to get back on track.