Cost of Living Adjustments (COLA) Benefits
COLA stands for Cost of Living Adjustments and not Coca-Cola as some might think. COLA is a special retirement benefit which is based on the monthly payment inflation index. After the enactment of the law, an automatic Cost of Living adjustment was provided by Social Security. Through these adjustments, the retirement benefits get increase according to the increase in the rate of inflation.
COLA can be determined by a number of ways. Usually, the calculation is based on the increase in the Consumer Price Index (CPI-W) in the third quarter on the third quarter index of the previous year. The process is pretty simple and is based on some factors such as the Social Security benefits, income of the applicant, the price index, the market condition and so on.
In most cases, the COLA benefits are announced in the month of October every year. The adjustments in the accounts are paid every year in the month of December. The amount of the COLA benefits that you will receive depends as per the CPI-W. Cost of Living Adjustments are also based on the inflation. At times, the yearly COLA can be as high as 14.3% while sometimes it can even come down to 1.3%. Cost of Living adjustments for the year 2008 was around 5.8%.
