What is the Cost of Living Adjustment? The Cost of Living Adjustment, also known as COLA, is an automatic annual increase to Social Security benefits meant as a way to keep pace with inflation.
How is the COLA determined? The Social Security Administration calculates the COLA based on the increase in the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) in the third quarter of the current year compared to the increase in the CPI-W in the third quarter of the previous year. The third quarter includes July, August, and September. The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor.
What is the history behind COLAs? Congress enacted the COLA provision as part of the 1972 Social Security Amendments. The first automatic annual COLA began in 1975. Prior to 1975, Social Security benefits were increased only when Congress enacted special legislation.
Are COLAs guaranteed? No, it all depends on the CPI-W. Since 1975, there have only been a few years with a zero percent COLA. Most recently, there was no COLA in 2016.
What is the 2023 COLA? The 2023 COLA was recently announced, and it is a historic 8.7 percent.