What is Social Security’s Cost of Living Adjustment
Social Security’s cost of living adjustment or COLA for short, is, according to Ticket to Work, an adjustment that “help people who receive Social Security benefits and payments keep up with the changing cost of living”.
Each year those who are enrolled into Social Security and who are receiving benefits may realize an increase in their benefit to keep up with any possible rising costs.
For example, in 2022, the United States experienced the highest rate of inflation or rise in costs since 1981. To help retirees keep up with this inflation Social Security increased everyone’s Social Security benefit by 8.70% for the next year (2023).
In simpler terms Social Security’s COLA could be considered as a pay increase for those who in Social Security to keep up with rising costs.
Please keep in mind that if there is no inflation within any given year, then there will most likely be no COLA and Social Security benefits will remain the same as the previous year..
Creation of Social Security’s Cost of Living Adjustment
When Social Security was originally created in 1935 with the passing of the Social Security Act there was no mechanism for retirees to receive an increase in benefits regardless of what happened to the price of goods during the year once they did enroll.
In 1969, September 25, President Truman sent Congress 9 recommendations for Social Security which included an “automatic adjustment of social security benefits to future increases in the cost of living.”
By 1972 Congress amended the Act to pave the way for the COLA which was finally implemented in 1975.
Here is a list of each COLA by year since inception: