Your Social Security by Tom Margenau

Q: Someone just told me that we are not going to get a Social Security increase next year. What is that all about?

A: Annual increases to Social Security benefits, called cost-of-living-adjustments or COLAs, are tied to the rate of inflation. For example, if inflation goes up 5 percent in one year, Social Security recipients get a 5 percent increase in their Social Security benefits the following year.

COLAs have been automatically added to Social Security checks every year since 1972. And that's because we've had some degree of inflation every year since 1972.

But for the first time in decades, we've actually experienced a year with no inflation. In fact, there has been deflation. So several weeks ago, the government announced that there would be no COLA increases added to Social Security benefits in 2010.

But don't go crying yourself to sleep just yet. Regular readers of this column know that I predicted the government's announcement many months ago. But I also predicted that members of Congress would stumble over themselves to pass some kind of token increase in Social Security benefits. I said that even though we're running trillion dollar deficits, politicians just can't pass up a chance to make granny happy.

As I pointed out in that previous column, there is precedent for this. When Congress first passed the automatic COLA law in the '70s, a provision of that law said that COLAs would NOT be granted if the annual inflation rate was less than 3 percent. At the time, inflation rates were running near double digits, so that seemed like a reasonable provision that would never need to be implemented.

But lo and behold, just a decade or so later, the country was in a period of sustained low inflation. Sure enough, in 1986, the rate dropped below 3 percent. And Congress, with the backing of the hero of fiscal conservatives everywhere, President Reagan, quickly passed a law that granted annual COLAs to Social Security recipients no matter how low the inflation rate might drop.

Yup, taking care of grandma trumps fiscal responsibility every time.

Q: I am 67 years old and I get about $700 per month in Social Security retirement. But I also work part time and usually make around $20,000 per year. How long do you think I'll have to work to build up my Social Security check to the $1,000 per month level?

A: The quick answer is maybe about 10 years. Or maybe never! I'll explain that paradox in a minute, but first a bit of background.

Many people mistakenly believe that Social Security benefits are frozen once you take them. But, in addition to the COLAs explained in the answer to the first question, benefits also can be increased every year to take into account any additional earnings a Social Security recipient might receive.

When your original Social Security benefit was computed, it was based on your average monthly wage using your 35 highest years of earnings. If you continue to work after you start your Social Security benefits, those benefits will increase IF the money you're making increases your overall average wage.

Or to put it another way, if the money you're making now is higher than the lowest year used in your original computation, the government will drop that low year, add in the new higher year, recalculate your average monthly wage and then refigure your monthly Social Security benefit.

So, whether or not you get an increase based on your current earnings depends entirely on your past earnings history. In other words, if your current average monthly wage is more than your average monthly wage over the last 35 years, you'll get annual increases in your Social Security check in addition to any COLAs.

And I can tell you this: the average increase in a Social Security benefit based on these kind of recalculations is in the $30 per month range. To increase your Social Security check from $700 per month to $1,000 per month, based solely on adjustments for additional earnings, would take you about 10 years.

To find out more about Tom Margenau and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2009 CREATORS.COM.