Social Security payments shrink in 2010-2011

For many retirees, Social Security provides the only stable and predictable income in this uncertain economy where shrinking investments, rising food and fuel costs and skyrocketing healthcare expenses make living on a fixed income increasingly difficult. While Social Security remains the bedrock of retirement security, the average Social Security retirement benefit is modest. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. Next year, is the first time in a generation that payments would not rise. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly. More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.

Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients. It is predicted Medicare premiums and out-of-pocket expenses will consume nearly $3 of every $10 of the average Social Security benefit.

President Barack Obama has said he would like tackle Social Security next year, after Congress finishes work on health care, climate change and new financial regulations. Social Security is facing long-term financial problems. The retirement program is projected to start paying out more money than it receives in 2016. Without changes, the retirement fund will be depleted in 2037, according to the Social Security trustees' annual report this year.

Lawmakers are preoccupied by health care, making it difficult to address other tough issues. Advocates for older people hope their efforts will get a boost in October, when the Social Security Administration officially announces that there will not be an increase in benefits next year.