Latest Cost-of-Living Adjustment

What is a COLA?
Legislation enacted in 1973 provides for automatic cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation.

Latest COLA
The latest COLA is 5.8 percent for Social Security benefits and SSI payments. Social Security benefits will increase by 5.8 percent beginning with the December 2008 benefits, which are payable in January 2009. Federal SSI payment levels will also increase by 5.8 percent effective for payments made for January 2009. Because the normal SSI payment date is the first of the month and January 1 is a holiday, the SSI payments for January are always made at the end of the previous December.

How is a COLA calculated?
The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next.

Computation of 5.8-percent COLA
For the December 2008 COLA, we measure the increase in the average CPI-W from the third calendar quarter of 2007 to the third quarter of 2008. These averages are 203.596 and 215.495 for the third calendar quarters of 2007 and 2008, respectively, and are derived from monthly CPI-Ws developed by the Bureau of Labor Statistics.

(215.495 - 203.596) / 203.596 x 100 = 5.8 percent.

Possible limitation on the COLA
Legislation enacted in 1983 may limit the COLA if the combined assets of the Social Security trust funds are below 20 percent of annual expenditures. (This limitation only applies to Social Security; SSI would be unaffected.) Such limitation has not occurred in the past, nor does it affect the current COLA determination. The combined trust fund assets at the beginning of 2008 are estimated to be 359.0 percent of 2008 expenditures.