How does Social Security calculate the COLA?

En español | 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 Social Security Administration has announced a 1.3 percent cost-of-living increase, which will boost 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

Also of Interest

• How are Social Security benefits calculated?
• When should I file to get the maximum retirement benefit?