Social Security COLA

Social Security COLAs are cost-of-living adjustments, or increases in benefit amounts, that the Social Security Administration makes to help recipients keep up with inflation. Some research has shown, however, that benefits continue to lose their buying power.

Elaine Silvestrini, Writer
Fact Checked
Fact Checked partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

Cite Us
How to Cite's Article

APA Silvestrini, E. (2022, May 18). Social Security COLA. Retrieved June 23, 2022, from

MLA Silvestrini, Elaine. "Social Security COLA.", 18 May 2022,

Chicago Silvestrini, Elaine. "Social Security COLA." Last modified May 18, 2022.

Why Trust
Why You Can Trust has provided reliable, accurate financial information to consumers since 2013. We adhere to ethical journalism practices, including presenting honest, unbiased information that follows Associated Press style guidelines and reporting facts from reliable, attributed sources. Our objective is to deliver the most comprehensive explanation of annuities and financial literacy topics using plain, straightforward language.

Our Partnerships, Vision and Goals

We pride ourselves on partnering with professionals like those from Senior Market Sales (SMS) — a market leader with over 30 years of experience in the insurance industry — who offer personalized retirement solutions for consumers across the country. Our relationships with partners including SMS and Insuractive, the company’s consumer-facing branch, allow us to facilitate the sale of annuities and other retirement-oriented financial products to consumers who are looking to purchase safe and reliable solutions to fill gaps in their retirement income. We are compensated when we produce legitimate inquiries, and that compensation helps make an even stronger resource for our audience. We may also, at times, sell lead data to partners in our network in order to best connect consumers to the information they request. Readers are in no way obligated to use our partners’ services to access the free resources on carefully selects partners who share a common goal of educating consumers and helping them select the most appropriate product for their unique financial and lifestyle goals. Our network of advisors will never recommend products that are not right for the consumer, nor will Additionally, operates independently of its partners and has complete editorial control over the information we publish.

Our vision is to provide users with the highest quality information possible about their financial options and empower them to make informed decisions based on their unique needs.

At the end of 2018, the average Social Security monthly benefit for retired workers was $1,422. After a 2.8 percent cost-of-living adjustment, COLA, that took effect in 2019, that monthly payment rose to $1,461 — a difference of $39 a month, or $468 a year.

The December 2019 COLA, which will take effect in January 2020, is 1.6 percent. That will increase the average monthly retirement benefit from $1,479 to $1,503, giving retirees an additional $24 a month, or $288 a year.

The increases, which apply to 63 million beneficiaries, are drawn from the Bureau of Labor Statistics’s consumer price index for urban wage earners and clerical workers, referred to as CPI-W.

While the CPI-W has led to COLAs most years, in some years, the index has calculated inflation as nonexistent, meaning there were no increases. Most recently, there were no benefits increases in 2010, 2011 or 2016.

COLAs are controversial for several reasons. Advocates for seniors say they are inadequate to keep up with the increasing costs of real expenses faced by retirees. At the other end, some want to reduce COLAs to cut Social Security expenses, arguing that beneficiaries can adjust by purchasing less expensive items.

COLA History

COLAs are automatic in the law and have been, in some form, since 1975.

But when Social Security was first enacted in 1940, there was no provision in the law for adjustments based on inflation.

In fact, the first Social Security payee, retired legal secretary Ida May Fuller of Ludlow, Vermont, received $22.54 a month for ten years.

At the time it was created, Social Security’s benefit was expected to remain constant. But in 1950, Congress added amendments, including an increase of 77 percent in Social Security benefits, to the law.

Ida May Fuller’s monthly benefit jumped to $41.40 in October 1950. That hike was followed by another raise in September 1952 after another action by Congress.

picture of ida may
The first recipient of Social Security benefits, Ida May Fuller, receives her first adjusted benefit check on October 3, 1950.

Then, in 1972, Congress passed new legislation that instituted automatic benefit increases, based on the increase in consumer prices, beginning in 1975. Coincidentally, Ida May Fuller died in 1975 at the age of 100.

However, the 1972 law provided for automatic increases only if the consumer price index rose by at least 3 percent. Then inflation rates began to slow, raising the possibility that there would be no COLA.

So, in 1986, Congress eliminated the 3 percent trigger, allowing for automatic COLAs tied to the consumer price index, no matter how low.

How Is COLA Calculated?

The government calculates the Social Security COLA by comparing the average CPI-W for the third quarter of the year in which the most recent COLA became effective to the average CPI-W for the third quarter of the current year.

The percentage increase is the COLA, or the increase in Social Security benefits beginning in December. The 2018 cost-of-living adjustment, which began paying in January 2019, was 2.8 percent.

According to the Social Security Administration, since 1982, “COLAs have been effective with benefits payable for December (received by beneficiaries in January).”

COLA Calculation Controversy: CPI-W vs Chained CPI vs CPI-E

When Social Security implemented automatic COLAs in 1975, the CPI-W was the only national consumer price index produced by the Bureau of Labor Statistics. Today, the CPI-W represents expenditures made by just 29 percent of the U.S. population.

The use of the CPI-W to calculate COLAs has been the subject of controversy for years. There are critics on both sides of the issue — some saying the CPI-W overestimates the effects of inflation on seniors and others saying it underestimates the costs.

Those who think the CPI-W overestimates real-life increases in the cost of living want to rein in spending by using an index called the chained CPI. This index considers adjustments consumers make when prices rise. They might switch brands or stop using certain products. If the price of steak went up significantly, for example, consumers might buy more chicken instead.

Other critics argue that the CPI-W applies to the general population and doesn’t consider the expenses shouldered more by seniors, such as medical costs and shelter, two expenses that rise at a faster rate. They urge the adoption of an index like the CPI-E, which is an experimental index designed to consider seniors’ costs.

For example, the CPI-W gives food and beverages a weight of 16.4 percent, compared with 12.4 percent for the CPI-E. For housing, those weights are 39.2 percent versus 46.6 percent, and for medical care, the CPI-W weight is 5.4 percent and the CPI-E weight is 11.3 percent.

Impact of Changing the COLA Index

A January 2019 report by the U. S. Government Accountability Office found that changing to one of these alternative indexes would have a relatively small impact on benefits in a given year but could become significant over time.

A change would have the most profound impact on low-income retirees who are on Social Security for an extended period. The report said that using a chained CPI over 30 years would result in a decrease in benefits of about 6 percent for a low-income household. Switching to the CPI-E would increase income for that household by about 4 percent. That’s because low-income households rely more heavily on Social Security, which makes up about 81 percent of their retirement income.

In contrast, for high-income households, the chained CPI would decrease total retirement income by about 1 percent, and using the CPI-E would increase it by about 1 percent over that same 30 years. High-income households rely on Social Security for only about 15 percent of their overall retirement income, according to the report. These households are more likely to have other sources of income, such as pensions, investments and retirement annuities.

The Social Security Administration has estimated that changing to the chained CPI would push about 456,000 people into poverty by 2050 and changing to the CPI-E would lift about 238,000 people out of poverty by 2050.

Looking for guaranteed income in retirement?
Annuities can provide you with income for life, ensuring you won't run out of money in retirement. Find out if an annuity is right for you.

Social Security COLAs vs. Inflation

Whether or not a change is implemented, researchers and advocates for seniors say the way COLAs are calculated is inadequate, causing Social Security to lose its buying power despite the increases.

The Senior Citizens League, a nonpartisan seniors’ group, says program benefits have lost 33 percent of buying power since 2000. Between 2000 and 2019, COLAs increased benefits by 50 percent, according to the league. But the costs of goods and services purchased by typical retirees rose by 100.3 percent in that same time.

The cost-of-living adjustment that began paying in January 2019 was the biggest check increase in seven years. However, 78 percent of respondents to a survey by The Senior Citizens League said their monthly expenses rose by more than $39.

Inflation and Senior Purchases

The league says the costs that are growing the most quickly are for prescription drugs, which cost 253 percent more in 2018 than in 2000.

Other quickly increasing costs cited by the league:
  • Homeowners insurance: 199 percent increase
  • Medicare Part B premiums: 198 percent increase
  • Home heating oil: 170 percent increase
  • Potatoes (gold): 168 percent increase
  • Propane gas: 141 percent increase
  • Medigap: 135 percent increase
  • Real estate taxes: 120 percent increase
  • Total medical costs (not including premiums): 124 percent increase

Group Says Seniors Lose Because of CPI Manipulation

In 2015, the league issued a white paper arguing that the government had raided the Social Security trust fund and offset some of the effects by having the Bureau of Labor Statistics manipulate its calculation of the CPI.

The authors argued that the bureau’s changes in CPI do not improve its accuracy. Rather, the white paper states, “No longer a measurement of the money necessary to purchase the same ‘market basket’ of goods and services, CPI is now based on an ever-changing ‘market basket,’ which assumes that when prices increase, Social Security recipients faced with price inflation will change their purchasing patterns.”

According to the authors, had the government not changed how it calculated the CPI, the COLA for 2014 would have been 5.2 percent, rather than 1.7 percent, but it had been manipulated to the extent that adjustments were only enough to allow recipients to meet “a lower standard of living.”

Switching to a chained CPI would reduce the adjustments even further, they said.

Medicare’s Effect on COLAs

Health care financing analyst Kristanna H. Peris reported in 2018 that Medicare and Social Security adjustments are measured by different indexes, which results in a faster rate of increase for Medicare premiums than for COLAs.

Congress added the hold-harmless provision to protect some beneficiaries’ monthly benefits from decreases linked to rising Medicare premiums. But the provision doesn’t cover everyone and, depending on the number of people held harmless in a given year, those who are not held harmless could, according to Peris, “bear the burden of meeting any resulting increase in premiums disproportionately.”

Medicare premiums and out-of-pocket costs are expected to continue to use up a growing portion of retirees’ benefits.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: May 18, 2022

15 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. AARP. (n.d.). Will my Social Security Benefit decrease if the Medicare premium increases? Retrieved from
  2. Backman, M. (2019, May 26). Will a Medicare Premium Hike Wipe Out Social Security’s Next COLA? Retrieved from
  3. Burdick, C. & Fisher, L. (2007). Social Security Cost-of-Living Adjustments and the Consumer Price Index. Retrieved from
  4. De Lea, B. (2019, May 17). Social Security COLA for 2020: What to know now. Retrieved from
  5. Peris, K.H. (2018, September 28). The Interaction Between Medicare Premiums and Social Security COLAs. Retrieved from
  6. Social Security Administration. (2019, October). Fact Sheet: 2020 Social Security Changes. Retrieved from
  7. Social Security Administration. (2019). Fact Sheet: Social Security. Retrieved from
  8. Social Security Administration. (n.d.). Cost-of-Living Adjustment. Retrieved from
  9. Social Security Administration. (n.d.). Cost-of-Living Adjustment (COLA) Information for 2020. Retrieved from
  10. Social Security Administration. (n.d.). Effect Of COLA On Average Social Security Benefits. Retrieved from
  11. Social Security Administration. (n.d.). Latest Cost-Of-Living Adjustment. Retrieved from
  12. Social Security Administration. (n.d.). Traditional Sources of Economic Security. Retrieved from
  13. The Senior Citizens League. (2011, October 4). Ask the Advisor: What is included in the CPI? Retrieved from
  14. The Senior Citizens League. (2015, March 17). Government Manipulation of the Consumer Price Index to Minimize Social Security COLA Adjustments. Retrieved from
  15. The Senior Citizens League. (2019, May 13). Social Security Benefits Lose 33% of Buying Power Since 2000. Retrieved from