Each year, individuals who receive benefits from the Social Security Administration pay close attention to the annual cost-of-living increase. This is a percentage-based raise to their benefits that’s based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. This takes specific inflation points into consideration to determine how much of a raise the recipients will receive.
The third-quarter readings from the CPI-W are what’s used to determine the COLA. This is the information that’s from July through September, so the COLA information should be released in the near future. In order to determine the COLA, the average CPI-W for the current year is compared to the previous year. If the current year is higher, an increase in benefits is made that’s in line with the increase in the average. The percentage is rounded up to the nearest tenth, so an increase of 1.16% would be rounded up to 1.2%.
The payouts of Social Security programs won’t decline if the CPI-W decreases, so recipients don’t have to worry about that. It’s possible that no COLA increase will be made. This has happened three times in the last 45 years.
It’s been noted that the COLA for this year is likely going to be one of the lowest in history, with an expected increase of around 1.2% to 1.4% increase. The September numbers aren’t in, so there’s a chance that it will be higher.
While the COLA information is important for current recipients, it’s also important for people who are applying or have applied for benefits because it affects them too. Keeping an eye on the COLA from year to year may also give you an idea of what to expect in the future.