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Social Security????????s Cost of Living Adjustment

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 62 million Americans will increase 1.7 percent in 2013. Almost every Social Security beneficiary is interested in Social Security????????s cost of living adjustments (COLA), but not everyone knows how the increase is calculated. Let????????s take a look at what the cost of living increase is, how it is applied and how adjustments are computed.

Each year Social Security and Supplemental Security Income benefits are adjusted to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index. The Department of Labor produces several indexes, but Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Social Security compares the average CPI-W for the third calendar quarter of the last year a COLA was determined to the average CPI-W for the third calendar quarter of the current year. If the CPI-W has increased, the amount of the increase is used to increase Social Security benefits beginning December (payable in January) of the current year. SSI benefits increase by the same percentage in January of the current year. If there is no increase, there can be no COLA.

Congress enacted the COLA provision as part of the 1972 Social Security Amendments. Prior to that law change, increases in Social Security benefits had to be passed by Congress. The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation. For more information about Social Security????????s cost of living adjustments, visit our website at www.socialsecurity.gov/cola .

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