What Are Social Security COLAs and How Do They Work?
Social Security is the government program that distributes retirement, disability, and survivors' benefits, and it's a great source of income for retirees for many reasons. For one thing, benefits go up periodically to keep pace with rising prices. These increases to Social Security benefits are called "cost of living adjustments," or COLAs. Cost of living adjustments occur yearly when there is an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
These increases are usually relatively small; in some years they're nonexistent. There are also circumstances where there is a COLA adjustment but benefits don't actually go up because of increases in Medicare premiums deducted from Social Security checks. Still, COLAs aim to protect the buying power of seniors, so it is important to understand how they work.
This guide will explain everything you need to know about Social Security COLAs so you'll understand how Social Security raises are calculated, what will affect the raise you receive, and why your raise doesn't always mean you get more money. You'll find out:
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