When Is the COLA Increase Announced?
Understand the essential process of Social Security's Cost-of-Living Adjustments. Learn how these crucial benefit updates are determined and implemented.
A Cost-of-Living Adjustment, known as COLA, helps millions of Americans receiving Social Security and Supplemental Security Income (SSI) benefits. This adjustment ensures that the purchasing power of these benefits does not diminish due to inflation. By increasing benefit amounts, the COLA helps recipients maintain their standard of living as the cost of goods and services rises over time.
The Annual Announcement Schedule
The Social Security Administration (SSA) consistently announces the Cost-of-Living Adjustment for the upcoming year in October. While the precise date of the announcement can vary, it reliably occurs within this month. This declaration provides beneficiaries and the public with the percentage by which benefits will be adjusted.
How the Increase is Calculated
The COLA calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures the average change over time in the prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services. The Social Security Administration determines the COLA by comparing the average CPI-W from the third quarter of the current year (July, August, and September) to the average CPI-W from the third quarter of the last year a COLA was enacted.
The percentage increase between these two periods directly determines the COLA. For example, if the CPI-W shows a 2.5% increase, then the COLA will be 2.5%. If there is no increase in the CPI-W, or if the increase is negligible when rounded, then no COLA is applied for that year. This calculation method has been in place since automatic annual COLAs began in 1975.
When Benefits Reflect the Change
Although the COLA is officially announced by the Social Security Administration in October, the increased benefit amounts do not become effective immediately. The adjustment typically begins with benefits payable for December, meaning beneficiaries see the change in their January payments of the following year. This timeline applies to both Social Security and Supplemental Security Income benefits. While most Social Security recipients receive their first adjusted payment in January, some SSI recipients may receive their increased payment slightly earlier. Beneficiaries receive notices about their new benefit amount in December, either by mail or through their online Social Security account.