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The Annual COLA Is Not Guaranteed - Motley Fool

Fresh on the heels of the recent announcement that next year’s Cost of Living Adjustment (COLA) will be 3.2%, many are already vociferously stating that it’s not enough. While there may be some merit to that opinion because many seniors rely so heavily on their Social Security benefit to pay household expenses, the COLA formula is, nevertheless, designed to provide an increase based specifically on changes to the Consumer Price Index for urban wage earners and clerical workers, known as the “CPI-W” – in other words, based on actual year-to-year inflation.

Inflation is, after all, a variable which is different every year, which also means that COLA is a variable and is not at all a guaranteed event. In fact, when inflation is non-existent no COLA is given, as occurred in 2010, 2011, and 2016. The good news? While an annual COLA isn’t guaranteed, even when inflation is negative your Social Security payment won’t go down, as discussed in this Motley Fool article by Maurie Backman.

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