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 calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation.
When the CPI-W rises, Social Security benefits are adjusted to reflect the increased cost of living.
This system has been in place since 1975 and ensures automatic annual benefit increases.
In recent years, COLA adjustments have fluctuated dramatically. For example, the COLA for benefits payable in December 2022 and received in January 2023 was 8.7%, reflecting the sharp rise in the CPI-W during the year ending in the third quarter of 2022.
This increase emphasizes the impact of inflation on daily expenses and enables beneficiaries to keep up with rising costs.
The COLA for December 2021 was 5.9%, which was received in January 2022, based on previous year’s inflation rates.
In contrast, the COLA for December 2020 was only 1.3%, indicating a period of low inflation.
Similarly, the December 2019 adjustment was 1.6%, while the December 2018 increase was 2.8%, demonstrating how inflation directly influences Social Security adjustments.
The December 2023 COLA is set at 3.2%, with beneficiaries receiving the increase in January 2024.
This adjustment reflects moderate inflation for the year ending in the third quarter of 2023.
Looking ahead, the December 2024 COLA is expected to be 2.5%, with payments adjusted in January 2025.
This ongoing adjustment process ensures that Social Security benefits remain in line with inflation, allowing recipients to manage changes in the cost of living.
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