The federal government announced on October 15, 2010 that Social Security Disability and Social Security Retirement recipients will not receive a cost-of-living adjustment in 2011. This will be the second year in a row that there has not been a cost-of-living increase.
The absence of a cost-of-living adjustment, calculated under a formula set by law, will be a shock to older Americans and the disabled already hit by plummeting home values, investment losses and rising health costs. More than 50 million people receive some form of Social Security benefits.
Before 2010 Social Security recipients had received automatic cost-of-living adjustments every year since 1975. The increase in 2009 was 5.8 percent. By law, Social Security benefits cannot go down.
The cost-of-living adjustment is intended to preserve the purchasing power of Social Security, by increasing benefits to keep pace with consumer prices. In the last year, overall inflation has been low, largely because of the economic downturn.
The Congressional Budget Office, has predicted that inflation would remain low for several years, so it is possible that Social Security might not pay a cost-of-living increase for several years.