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The COLA that Fizzled

By Tom Margenau Published: December 30, 2009
As we prepare for the new year, it's a good time to review the major Social Security changes that will be taking place in 2010. Or in this case, some of the changes that won't be taking place! As has been my year-end custom, I write a column going over the scheduled and automatic updates built into Social Security law that are tied to the annual cost-of-living adjustment, or COLA. Most adjustments are based on the annual increase in the government's inflation measure called the Consumer Price Index.

But in case you hadn't heard, the economy was spiraling downward for all of 2009 and much of the latter half of 2008. That time frame happens to coincide with the time frame used to measure the CPI for Social Security purposes — and lo and behold, there wasn't anything to measure! For the first time in decades, we had a stretch of deflation instead of inflation. And no inflation means no COLA, which that means no increase in people's Social Security checks.

Human nature being what it is, I know people will inevitably complain about this. The most common gripe will go something like this: "How can these government bureaucrats tell me there was no inflation? If they were paying my grocery bills and rent, they'd know that the cost of everything is going up!" All I can tell you is that the Consumer Price Index, as determined by the Bureau of Labor Statistics, is and always has been the government's official measuring stick for inflation. If you want to find out how they do it, you can go to their website at

Another government measurement — specifically the one that tracks increases in average wages — is used to make adjustments to other Social Security indexes, like the earnings penalty thresholds for Social Security beneficiaries who are under age 66 and still working. Even though there was an increase in wages during 2009, meaning that the earnings thresholds should go up, the law prevents an increase in those levels if there is no increase in Social Security benefits. So, the penalty rates will stay at their 2009 levels.

That means that beneficiaries who are under their full retirement age (age 66 for most people) can earn up to $14,160 in 2010 and still collect all their Social Security checks. But for every $2 they earn over the $14,160 threshold, $1 must be withheld from their annual Social Security benefits. In the year you reach age 66, you can make $37,680 between January and the month you turn 66. From age 66 onward, there is no limit on your earnings.

Other Social Security factors will increase in 2010 because there was a rise in the average national wage. This includes an increase in the amount of money disabled people can make per month, if they are trying to work despite their disability.

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