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COLA

| January 05, 2021
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Social Security’s Annual Cost of Living Adjustment (COLA)

I would submit to you that there are 10 humans on Earth that fully understand how Social Security’s annual cost of living adjustment (COLA) is calculated.  

Here are a few points to be aware of:

  • The annual COLA “pay raise” is usually announced in October.
  • The first COLA was in 1975. Before that any Social Security increases were set by legislation. (ssa.gov)
  • The annual formula is a measure of inflation and is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)
  • The average prices of the third quarter are used versus those same numbers from those of the previous year as the fourth quarter numbers are usually not available until mid-January (What Is the Social Security COLA? (msn.com)

If deflation were to occur and there isn’t a “raise”, Social Security law dictates that the monthly payment stays at 0%.(www.ssa.gov). This can be for multiple years.

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