Cost Of Living Adjustment (COLA)
An adjustment made to Social Security and supplemental security income in order to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period. Investopedia Says:
For example, if Kevin received $10,000 last year for Social Security benefits and COLAs for this year were 4.1%, then his benefits for this year would be $10,410.
During the 1970s, inflation was really high, and as a result compensation related contracts, real estate contracts and government benefits, led to the popularized usage of COLAs to protect against inflation. Related Terms:
Constant Dollar
Consumer Price Index - CPI
Inflation
Integrated Pension Plan
Social Security
Supplemental Security Income - SSI |