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Seniors feel the pinch of no benefit increase

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Inflation has barely budged in recent months, but try telling that to the seniors who won't be getting an increase in their Social Security benefits next year.

The government reported its consumer price index was up 1.1% over the last year, indicating inflation is still sluggish.

But with prices up on health care, food and other essentials, it sure won't seem that way to the 58 million retirees and disabled Americans who depend on Social Security checks.

After analyzing the latest inflation figures released Friday, the Social Security Administration announced it won't be giving out a cost-of-living adjustment, or COLA, to those folks in 2011.

Many seniors count on annual Social Security benefit increases to help them afford their basic needs, but this year, they're likely to see the costs of many of those basic needs rise more than the overall inflation rate.

"Having low inflation is generally a good thing for people on a fixed income, but this is a different kind of economy people are facing," said David Certner, AARP's legislative policy director. "Generally, there's an unease about being able to continue to make it in this economy."

Utilities like electricity and gas are up 1.5% over last year and food is up 1.4%. Gas prices have risen 5.1%.

One of the biggest costs for seniors -- medical care including doctors visits, hospital bills and nursing homes -- is up 2.6%. And the average monthly prescription drug premiums under Medicare will rise 10% in 2011, according to the Henry J. Kaiser Family Foundation.

Overall, prescription drug costs under Medicare are 57% higher than in 2006, the first year of the Medicare Part D drug benefit.

At the same time as other increased costs, home values -- which many older Americans rely on as their primary retirement asset -- have declined.

And many seniors are still struggling to make up losses in their retirement accounts after the recession.

"Seniors have seen their investments and pensions shrink, and their home values drop," Certner said. "They don't have many real opportunities to increase their income or wealth."

Seniors get snubbed

It's the second year in a row the government won't be issuing a cost-of-living increase to Social Security beneficiaries, because overall, consumer prices still fall below where they were in 2008.

By law, the government has to determine the increase based on the consumer price index's performance in the third quarter, so Friday's release of September's lower-than-expected figures was the final nail in the coffin for the cost-of-living adjustment.

The announcement sparked backlash from seniors groups including AARP, and spurred President Obama to renew his call for $250 payouts to Social Security recipients as a way to compensate for the lack of COLA.

But critics of the growing national deficit point out that an increase this year is unwarranted by the inflation figures. And because the last COLA two years ago was uncharacteristically based on surging energy prices, seniors are already receiving more in benefits than actual inflation warrants.

"The truth is, seniors don't need a raise based on inflation this year because inflation has been so low. They actually got an artificially high raise last time around so they are faring better than many others in this economy who haven't benefited from generous raises," said Maya MacGuineas, president of the Committee for a Responsible Budget. To top of page

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