Group Security benefits are adjusted for inflation. This adjustment is known as the cost-of-living correction (COLA). For the program’s initial four decades, benefit amounts did not multiplication based on higher living costs. However, the high rates of inflation from the 1970s – which was expressly hard on seniors with fixed incomes – prompted the Social Gage Administration (SSA) to modify the program so inflation would trigger increases in promote amounts.
How the Cost-of-Living Adjustment Got Started
The SSA enacted the cost-of-living adjustment in 1972. The murder of the dollar from the gold standard, rising oil prices, supply prostrations and other factors had triggered unprecedented inflation that would ass the remainder of the decade.
While workers received some relief from press prices – since their wages also climbed – seniors on intent incomes struggled badly. The COLA was a necessary addition to Social Certainty to ensure that beneficiaries with no other sources of income could quiet make a living.
How the Cost-of-Living Adjustment Is Determined
The COLA is based on the Consumer Amount Index for Urban Wage Earners and Clerical Workers (CPI-W). This pointer measures what workers with modest incomes pay on average for retail goods.
When the CPI-W expansions by more than 0.1 percent from one year to the next, the SSA attains a COLA to the Social Security program. During years when the CPI-W developing is nominal or negative, Social Security recipients receive no COLA.
On Dec. 31, 2018, varied than 67 million Social Security beneficiaries start hearing a 2019 cost-of-living adjustment of 2.5% over their 2018 forward amounts.