Can Social Security Really Keep Up With Inflation?
If you took a $1 bill today, buried it in a time capsule, and uncovered it 30 years later, you'd find that it's worth a lot less than its current value. We can thank inflation for that.
Inflation causes the cost of living to rise over time, and it's the reason why annual Social Security cost-of-living adjustments, or COLAs, were implemented decades ago. Seniors on Social Security start out collecting a monthly benefit based on their wage history. But that benefit needs to go up somehow to help ensure that they're are able to keep pace with inflation.
Now COLAs are by no means predetermined -- meaning, there's no preset percentage by which benefits go up from year to year. Rather, COLAs are calculated on an annual basis based on fluctuations in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When the cost of common goods and services increases, COLAs do the same.
Source Fool.com
