There was no cost-of-living increase in Social Security benefits for 2010, making it the first time that benefits have not been increased each year since the cost-of-living adjustment (COLA) became effective in 1975.

In 2009, Social Security beneficiaries received a 5.8-percent COLA, the largest increase since 1982, based mainly on the energy price spike.

Because there is no COLA for benefits, the Social Security Administration (SSA) is prohibited by law from increasing the maximum amount of earnings subject to the Social Security tax.

The Social Security Act established Social Security, which is based on contributions made by workers, in 1935.

These contributions are Federal Insurance Contributions Act (FICA) taxes that are withheld from most paychecks, and workers receive benefits after retirement.

The Social Security Administration mails a summary of your benefits each year, showing years worked, and the summary can be requested by calling (800-772-1213), TTY (1-800-325-0778), or online at

The Social Security Web site has a vast amount of information that includes applying online for benefits, forms to download, answers to questions, and information such as the online retirement estimator tool.

The earliest citizens can start collecting Social Security retirement benefits is age 62, and the latest is age 70.

Citizens can collect Social Security while still working, but the government will cut their payouts using a formula based on how much they earn.

According to Walter Updegrave, the senior editor for Money Magazine on the Web site, Social Security should be the cornerstone of retirement planning.

Updegrave said that Social Security provides 50 percent of the income for more than half of married, retired couples and about 20 percent for high earners.

“It’s the only source of income you’re likely to have that’s guaranteed to last for life and keep pace with inflation,” he said.

Updegrave said that despite all of the concerns, Americans could count on Social Security to be there.

The funds from workers’ payroll taxes will cover all retirees’ payments until 2016 even if no changes are made to the current program. After that, the SSA can cover full benefits until 2037 by cashing in its Department of Treasury bonds from the Social Security trust fund, according to Updegrave.

When the bonds run out, income tax from payroll taxes would be enough to cover about 75 percent of payments for decades, said Updegrave.

As to the question of whether benefits are taxed, Updegrave said that currently, about a third of Social Security recipients pay income tax on a portion of their benefits, and the SSA projects upwards of 42 percent of recipients will be doing so by 2018.

To lessen “the tax bite,” Updegrave said one option is to wait at least until full retirement age to claim Social Security, if you think that income from a post-retirement job could result in a big tax bill.

Another way, he said, is to pull money from a Roth IRA (individual retirement account) instead of a traditional IRA or 401(k) because Roth withdrawals don’t count as income in figuring whether benefits are taxable.

Individuals are encouraged to confer with their financial advisor or tax preparer about how Social Security may affect their finances.