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Exploring a Myth: Social Security’s COLA is Guaranteed

Let’s start with some background…each year’s cost of living adjustment (COLA) results from comparing the third quarter average Consumer Price Index each year to the same average from the preceding year. The result of dividing the current year’s average by the previous year’s average produces the COLA for the following year. For 2024’s adjustment, the 2022 third-quarter average was 301.234 and the comparable figure for 2022 was 291.901, producing the 3.2% benefit addition.

It’s not always the case that the year-to-year CPI calculation produces a positive result, as was the case three times so far this century. As recently as 2016, for example, the 2015 third-quarter average was 233.284 and the comparable figure for 2014 was 234.242, producing a negative change of 0.4. Fortunately for beneficiaries, Social Security law prohibits a negative COLA, so the negative result was ruled out and the COLA for 2016 was zero.

So, the rumor that there will always be a benefit increase in January is untrue, although having only three zero COLA years since the start of automated adjustments in 1974 leads folks to assume there will always be a boost in the new year. The size of the adjustment fluctuates with economic cycles, and has ranged from a high of 14.3 percent in 1980 to 0.3% in 2017 (excluding, of course, the zero years). Here’s a historical look-see at how the adjustments occurred since 1974, just to show you the cycles in action. The historical average for this 49-year period, incidentally, was 3.8 percent, so the 2024 adjustment of 3.2% isn’t that far from the average.

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