For retiree Social Security provides a significant source of income for most recipients. But the lack of cost of living adjustments for two years running, and the ever increasing Medicare Insurance premium will nullify the next COLA expected in 2012.
In 2009 the average social security beneficiary received $1171.60 per month. [Reference] Out of that they took $96.50 for the Medicare insurance premium. Leaving a net benefit of $1075.10. In 2010 the Medicare premium was increased 15 percent to $110.50. [2010 Medicare Premium] Because there was no Social Security COLA in 2010 the Medicare premium increase was deferred. We hear now that there will be no COLA in 2011 either. It is likely that there will be another Medicare premium increase for 2011, and another likely again in 2012 thanks to ObamaCare.
The 2011 Medicare premium is now set to $115.40.[Reference] So pending increases in Medicare Insurance premiums now total $18.90 or 19.6 percent. It will require a average Social Security benefit to increase 1.6 percent to break even on the Medicare premium increases that have been deferred.
If a COLA is determined to be needed in 2012, the percentage is not known at this time, but what ever Medicare Insurance premiums that have been deferred since 2010 will become effective the year a COLA is provided.
The Medicare insurance premium in 2010 was an increase of 15 percent. Because of ObamaCare passing in 2010 it is highly likely that the 15 percent increases will continue. If that is the case and in all likelihood it will be a 4 percent COLA will result in a net benefit increase of 0.08 percent in 2012, or about a dollar.
So if you are expecting a big COLA in 2012 after two years of no COLA at all you will be sadly disappointed. By then the Medicare premium will be $146.00 and it will consume any nearly all of any increase that the COLA might of provided.