Social Security benefits receive a cost-of-living adjustment (COLA) each year to match inflation rates, helping beneficiaries maintain their purchasing power despite economic changes.
The COLA is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation.
When the CPI-W increases, Social Security benefits are adjusted accordingly to reflect the higher cost of living.
This system has been in place since 1975, ensuring automatic annual benefit increases.
In recent years, COLA adjustments have fluctuated significantly. For example, the COLA for benefits payable in December 2022, received in January 2023, was 8.7%, reflecting the sharp rise in the CPI-W over the year ending in the third quarter of 2022.
This increase highlights the impact of inflation on everyday expenses and helps beneficiaries keep up with rising costs.
The COLA for December 2021 was 5.9%, received in January 2022, based on inflationary trends over the previous year.
In contrast, the COLA for December 2020 was only 1.3%, reflecting a period of lower inflation.
Similarly, the December 2019 adjustment was 1.6%, and the December 2018 increase was 2.8%, showing how inflation directly affects Social Security adjustments.
For December 2023, the COLA is set at 3.2%, with beneficiaries receiving the increase in January 2024.
This adjustment reflects moderate inflation over the year ending in the third quarter of 2023.
Looking ahead, the COLA for December 2024 is projected to be 2.5%, with payments adjusted in January 2025.
This ongoing adjustment process ensures that Social Security benefits remain aligned with inflation, helping recipients manage changes in the cost of living.
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