Since 1975, Social Security benefits have been adjusted for inflation annually. They are adjusted based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the change in prices for a market basket of goods and services, including food, energy, and medical care.
A subset of the Consumer Price Index, the CPI-W measures a broader range of retail prices which was slightly lower in July, at 8.5 percent. A Cost of Living Adjustment (COLA) is calculated by comparing the CPI-W average for July, August, and September to that of the previous year.
As an example, the CPI-W in July 2021 increased by 6 percent from July 2020. A year-on-year increase of 5.8 percent was recorded in August 2021, and a 5.9 percent increase was recorded in September 2021. These three figures were averaged to produce the 5.9 percent COLA that was implemented in January 2022.
Since 2015, COLAs have averaged 1.7 percent, ranging from zero in 2015 to 3.6 percent in 2011. COLAs cannot be applied in the absence of inflation – that was the case in 2009, 2010, and 2015. 1980 was the year with the largest increase, at 14.3 percent.
COLA increases by year
Note: Since 1983 COLA changes take effect the next Jan. 1
| YEAR | COLA % | YEAR | COLA % |
|---|---|---|---|
| 1975 | 8.0 | 1999 | 2.5 |
| 1976 | 6.4 | 2000 | 3.5 |
| 1977 | 5.9 | 2001 | 2.6 |
| 1978 | 6.5 | 2002 | 1.4 |
| 1979 | 9.9 | 2003 | 2.1 |
| 1980 | 14.3 | 2004 | 2.7 |
| 1981 | 11.2 | 2005 | 4.1 |
| 1982 | 7.4 | 2006 | 3.3 |
| 1983 | 3.5 | 2007 | 2.3 |
| 1984 | 3.5 | 2008 | 5.8 |
| 1985 | 3.1 | 2009 | 0.0 |
| 1986 | 1.3 | 2010 | 0.0 |
| 1987 | 4.2 | 2011 | 3.6 |
| 1988 | 4.0 | 2012 | 1.7 |
| 1989 | 4.7 | 2013 | 1.5 |
| 1990 | 5.4 | 2014 | 1.7 |
| 1991 | 3.7 | 2015 | 0.0 |
| 1992 | 3.0 | 2016 | 0.3 |
| 1993 | 2.6 | 2017 | 2.0 |
| 1994 | 2.8 | 2018 | 2.8 |
| 1995 | 2.6 | 2019 | 1.6 |
| 1996 | 2.9 | 2020 | 1.3 |
| 1997 | 2.1 | 2021 | 5.9 |
| 1998 | 1.3 |
Impact for 2023
In 2023, Social Security benefits could increase by the most in 40 years due to rising prices fueling forecasts of nearly double-digit cost-of-living adjustments (COLAs).
According to the Social Security Administration (SSA), inflation for July was 9.1 percent – the first of three months it uses to determine the final COLA in October. Any increases in benefits would be effective in January 2023.
Original article by Andy Markowitz (AARP)