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More retiree rebates on tap?

Around 57 million seniors, veterans and individuals receiving federal disability payments could each get a $250 check from Uncle Sam next year.

On Thursday afternoon, President Obama threw his support behind the payout, which would cost an estimated $13 billion.

Refund check (3) The reason for this latest targeted rebate? Government officials say low inflation will mean no cost-of-living increase next year for Social Security recipients.

The proposed $250 payment equals a 2 percent increase for the average retiree who gets the federal benefit.

"These payments will provide aid to more than 50 million people in the coming year, relief that will not only make a difference for them, but for our economy as a whole, complementing the tax cuts we've provided working families and small businesses through the Recovery Act,"  Obama said in a statement.

Now about the cost: The White House said it would be meeting with Congress soon to discuss ways to cover the cost of the retiree rebate checks.

Given that seniors were among the most vocal opponents of the prez's health care reform proposal, taking their fear and frustration out on Representatives and Senators during recent town hall meetings, I suspect even the most fiscally conservative lawmakers will work to find a way to make these checks a reality.

The problem with low inflation: Social Security recipients aren't the only ones who could suffer because of low inflation.

Current law pegs tax-favored retirement account contribution limits to inflation. The IRS is now analyzing economic data and working on its annual inflation adjustment document, which should be released sometime this month.

Some economists and tax experts have expressed concern that a negative inflation rate over the last year could mean that the contribution limits on 401(k)s, IRAs and other retirement funds could actually be reduced for 2010.

In light of the beating that retirement accounts have taken during the economic downturn, hampering people as they try to rebuild their nest eggs isn't exactly the message that Washington wants to send.

So the IRS and Treasury Department say they are working on ways to at least keep the limits at the 2009 level.


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