Explanation of Social Security Cost-of-Living Adjustments (COLAs) and How They Are Calculated
Social Security benefits are designed to help retirees and individuals with disabilities maintain their standard of living as the cost of living rises. Cost-of-Living Adjustments (COLAs) are an essential component of the Social Security program, ensuring that the purchasing power of beneficiaries’ benefits keeps up with inflation. Here’s an explanation of COLAs and how they are calculated:
Understanding Cost-of-Living Adjustments (COLAs)
What Are COLAs?
COLAs are annual adjustments to Social Security and Supplemental Security Income (SSI) benefits to counteract the effects of inflation. These adjustments help ensure that the real value of benefits does not decrease over time, enabling recipients to afford the same level of goods and services despite increases in the cost of living.
Why Are COLAs Important?
Maintaining the purchasing power of Social Security benefits is crucial for the financial security of retirees and individuals with disabilities. Without COLAs, beneficiaries’ incomes would gradually erode due to the …
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