A cost-of-living adjustment (COLA) is a yearly increase in income or benefits to help offset the effects of inflation. It’s designed to help people maintain their standard of living when the cost of everyday goods and services increases. Whether you receive Social Security Disability Insurance, Supplemental Security Income, or other fixed benefits, a COLA helps make sure your money keeps its value as prices go up.
In this article, we’ll explain how COLAs work, how they’re calculated, who receives them, where to find your COLA notice, and how a disability attorney can help if your benefits aren’t keeping up.
Key Takeaways
- COLAs are annual percentage increases applied to Social Security benefits, pensions, or wages to ensure your income keeps pace with rising living costs.
- Social Security COLAs are automatic and begin in January.
- The Consumer Price Index for Urban Wage Earners and Clerical Workers tracks inflation and determines the annual COLA rate.
- Everyone receiving SSDI or SSI benefits gets the COLA.
- A disability attorney can help review your Social Security cost-of-living adjustment and ensure you’re receiving the full amount you may be entitled to.
What Is a Cost-of-Living Adjustment (COLA)?
A cost-of-living adjustment is a percentage increase added to wages, Social Security benefits, or pensions to keep up with inflation. When the prices of everyday essentials rise, a COLA helps your income rise along with them.
This is especially important for seniors, disabled individuals, and others living on a fixed income. Without COLAs, their purchasing power would shrink over time, making it harder to pay for basic needs.
COLAs were first introduced for Social Security in 1975 as part of a shift toward automatic benefit increases tied to inflation, replacing the need for Congress to approve each adjustment manually. The purpose was simple but vital: to ensure that people relying on fixed income wouldn’t fall behind as the cost-of-living increased. Since then, COLAs have become a cornerstone of income stability for millions of Americans.
COLA & Social Security
One of the most well-known uses of the cost-of-living adjustment is to make sure retirees and people with disabilities can keep up with inflation. The cost-of-living adjustment for Social Security is automatically applied in January each year.
Why it matters: Without COLAs, fixed benefits would stay the same even as prices go up, forcing recipients to cut back on essentials like medicine, food, and housing.
SSI COLAs
If you receive Supplemental Security Income, the cost-of-living adjustment typically matches the percentage increase applied to SSDI benefits. However, there’s a slight difference in timing: while Social Security COLAs take effect with payments issued in January, SSI COLAs are effective 1 month earlier, starting with the December 31st payment of the prior year.
How Is a COLA Calculated?
The Social Security cost-of-living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Each year, the government compares the average CPI-W from the third quarter of the current year to the same period in the previous year. If there’s an increase, that percentage becomes the COLA for the next year.
Formula (Simplified)
If CPI-W increases from 260 to 270:
COLA = ((270 – 260) ÷ 260) x 100 = 3.85%
So, benefits would increase by 3.85%.
This same principle is used for calculating COLAs in other settings, like employee salaries or retirement programs. However, not every employer or program offers a COLA.
Example: Calculating Your Social Security Benefits With COLA
Let’s say you receive $1,800 per month in Social Security benefits. If the COLA for the upcoming year is 3.85%, here’s how your new benefit amount would be calculated:
$1,800 x 0.0385 = $69.30
$1,800 + $69.30 = $1,869.30
So, starting in January, you would receive $1,869.30 per month, helping offset the rising costs of groceries, gas, rent, and other essentials.
What Is the Average Cost-of-Living Adjustment?
Historically, the average cost-of-living adjustment for Social Security has hovered around 2–3% per year. However, in times of high inflation, COLAs can jump significantly. In recent years, there have been record-setting increases to account for spikes in the cost of goods and services.
It’s important to note that COLAs may be 0% in years when inflation is flat or prices drop.
Does Everyone on Social Security Get a COLA?
Yes, all Social Security recipients automatically receive the COLA increase. This includes:
- Retirees
- People with disabilities
- Surviving spouses and children
- Those receiving spousal benefits
No Application Required
You do not need to apply to receive a COLA increase. It is automatic, and you’ll be notified in advance of your new benefit amount either online or by mail.
Where to Find Your Latest COLA Information
Wondering how to find your most recent cost-of-living adjustment? The Social Security Administration makes it easy for you to check your benefit update each year. Most beneficiaries receive their COLA notice in December, before the changes take effect in January.
How to Access Your COLA Notice:
- Sign in to your my Social Security account.
- Check the Message Center for your COLA letter.
- Choose how you’d like to get notified—by email, text, or both.
This is a convenient way to stay updated about your Social Security cost-of-living adjustment without waiting for a physical letter.
How a Disability Attorney Can Help
If you’re unsure whether you’re receiving the correct COLA for SSI or SSDI, or if your benefits seem lower than expected, it’s important to get help. At Disability Advocates of America, we specialize in helping people in California understand and maximize their disability benefits.
Our trusted advocates can:
- Review your Social Security cost-of-living adjustment
- Make sure your payments are correctly calculated
- Help you appeal any errors or underpayments
- Guide you through the disability benefits process
Contact us today for a free consultation. Dr. Bill LaTour and his experienced team are dedicated to making sure your benefits reflect every dollar you may be entitled to.
