Social Security And The Cost-Of-Living Adjustment

The Social Security Administration’s recent cost-of-living adjustment announcement has implications for many people receiving Social Security. Tom Margenau writes in his new column, “COLA News You Might Have Missed”:

Here’s an interesting tidbit about Social Security COLAs that demonstrates the power of the senior-citizen lobby in this country and how politicians will bend over backwards to court their votes: The first increase for 2012 will be paid in January.

On the surface, that may seem to make sense. But remember that Social Security benefits are always paid one month in arrears. In other words, the check that comes in January 2012 is actually the payment for December 2011. So why do folks start getting their 2012 COLA increase on their December 2011 Social Security check?

Well, you have to go back about 20 years or so. At that time, COLA increases were effective with the month they were due. Had that old law never been changed, people would have been scheduled to get their first 2012 COLA increase on their January checks, which are paid in February.

But a couple of decades ago, seniors got all in a huff about this. They mistakenly thought they were being cheated out of one month’s COLA because they didn’t get their first increase until February. Rather than simply explain the logistics of the one-month delay in benefits, Congress knuckled under and decided that henceforth, COLA increases would be effective with the December payment of the prior year (payable in January of the next).