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The Social Security Administration has enacted a 2% cost-of-living adjustment (COLA) for this year. While this news may be making headlines, what does it mean for you?
COLA helps ensure inflation doesn’t erode the purchasing power of your Social Security benefit. The amount of COLA, which is typically announced in November, is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – a measure tied to inflation – from the third quarter of the previous year to the third quarter of the current year. If there is no increase in CPI-W, there can be no COLA.* Over the past few years, COLAs have been almost nonexistent. In fact, this year’s 2% adjustment is the biggest COLA increase since 2012.
While COLA (and inflation in general) may reflect the national average, it’s important to note that this may not reflect your “personal inflation rate.” Depending on your mix of expenses (everything from monthly living costs to health care), the COLA may or may not be keeping up.
*Source: Social Security Administration. History of Automatic Cost-of-Living Adjustments (COLA). www.ssa.gov/news/cola/