How does Social Security calculate the COLA?
Your Social Security payment typically is adjusted annually for inflation to ensure that the purchasing power of benefits is not eroded by rising prices. This cost-of-living adjustment, or COLA, tracks inflation using the government’s measure of consumer prices for a variety of household goods and services.
Benefits go up if there is a measurable increase (at least 0.1 percent) in this price index from year to year. For 2021, the cost-of-living increase is 1.3 percent, boosting benefits by an average of $20 a month starting in January. The COLA was 1.6 percent in 2020, 2.8 percent in 2019 and 2 percent in 2018.
Keep in mind
- Even when there is a cost-of-living adjustment, you might not see all of the increase in your benefit payment. If your Medicare Part B premiums are deducted from your Social Security (as is the case with 70 percent of Part B enrollees), a Medicare rate increase could offset the COLA.
Updated October 13, 2020
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