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The Social Security Cost of Living Adjustment (COLA) is an increase in the amount of Social Security benefits that are intended to keep pace with inflation. The COLA is determined each year by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the current year to the third quarter of the previous year. If there is an increase in the CPI-W, then Social Security benefits will also increase by that percentage.
The COLA helps ensure that the purchasing power of Social Security benefits remains constant over time. However, COLA is not guaranteed, and in some years, there is no increase or a very small increase. The COLA can affect many factors, such as inflation, economic conditions, and political decisions.
It’s important to note that COLA only applies to Social Security benefits, not to SSI (Supplemental Security Income) payments, which are based on need and are not subject to COLA adjustments.