The cost of living adjustment, or COLA, is defined as the yearly increase in Social Security benefits and income that is made in order to stay proportional to the current cost of living. It can apply to salaries, wages, benefits and more. Here, the attorneys at Disability Associates provide an overview of this important program as well as how it is especially significant in 2019.
COLA Applies to Social Security Benefits Every Year
Every year, the total amount of Social Security benefits every individual is eligible to receive increases in order to keep up with the rise in the cost of living that occurs each year. A 2.8% increase in Social Security benefits was announced on October 11th, 2018 to be applied to 2019 Social Security benefits.
In general, salaries for government positions utilize COLA more than positions at private businesses. This is because private businesses rely on profit, which means that excellent employees that contribute to the growth of a business are eligible for raises. Government positions are not based on profitability, and therefore offer yearly COLA benefits in order to retain employees and ensure their yearly salary grows with the economy’s natural inflation.
COLA is Calculated Based on the Consumer Price Index
COLA was introduced by Congress in 1975 to combat the dramatic inflation of the time, and since then COLA has been used as a tool to manage inflation and balance income with the yearly average cost of living. The Consumer Price Index (CPI) is the federal government’s official measure of inflation and calculates the yearly COLA increase by evaluating the changes in pricing for over 80,000 products and services.
The CPI measures the changes in pricing on a monthly basis and reports both the inflation and deflation of goods and services. The Bureau of Labor Statistics evaluates the goods and services being measured, which represent roughly 87% of primarily urban households in the United States. Since its introduction in 1975, COLA has remained under 6% each year.
The 2019 COLA Adjustment is the Largest Increase Since 2011
As the economy continues to recover from the 2008 recession, stronger economic growth has resulted in businesses gradually raising prices for their goods and services. In response to our economy’s current situation, COLA has adjusted by 2.8%, which is the largest adjustment since 2011. This adjustment will benefit approximately 67 million Americans, and this increase translates to an extra $39 a month per individual who collects Social Security retirement benefits.
Consult an Experienced Attorney at Disability Associates
The 2019 COLA adjustment is a significant event that represents both our changing economy and our government’s commitment to ensuring citizens collecting Social Security benefits are provided benefits that are comparable to current costs. For additional information on how the COLA works, or if you seek a qualified disability attorney to provide you legal counsel, contact Disability Associates today.