And if you are currently receiving Social Security benefits, you are in for a surprise.
The Social Security and Medicare Trustees are predicting that you and other Social Security beneficiaries will not receive an annual cost-of-living adjustment (COLA) in either 2010 or 2011.
This is the first time in more than 30 years that the Social Security Administration has failed to come through with an annual increase in benefits.
The trustees also predict that the Social Security cost-of-living adjustment (COLA) in 2012 will be only 1.4 percent. By contrast, the 2008 Social Security COLA was 2.3 percent
and the 2009 COLA was 5.8 percent. It’s ironic that Social Security benefits recipients are facing two years of no COLA increase following 2009’s increase—which was the largest annual cost-of-living adjustment for Social Security benefits recipients since 1982.
What if the Government Does Nothing to Replenish the Social Security Coffers?
If nothing is done to improve the fiscal health of Social Security, the payroll taxes paid by U.S. workers are expected to cover the cost of Social Security benefits until 2016.
After that, the government will be forced to take money from the Social Security trust fund every year to fill the gap between the payroll taxes taken in and the money paid out in benefits.
According to the projections in the 2009 report, the government would be able to keep that up until 2037, when the trust fund would be empty and payroll taxes would cover no more than 78 percent of the promised benefits.
How Do These Social Security Issues Affect People Who Have Not Yet Retired?
If you retire before 2037, you are almost certain to receive most of the benefits you were promised and have been counting on, but probably not all.
Social Security benefits are the main source of income for more than half of older Americans—a number that is almost certain to grow significantly as more baby boomers retire—and politicians probably are not going to just let things deteriorate and then hand millions of seniors a 22 percent pay cut after 2037.
Congress is likely to spread the pain and soften the blow over then next couple of decades by combining modest cuts in benefits for older Americans and a small payroll tax increase for younger workers—while looking for new funding sources for future Social Security benefits.
