The Social Security Administration (SSA) announced in October that people receiving Social Security disability insurance (SSDI) benefits, Social Security retirement benefits, or Supplemental Security Insurance (SSI) benefits are getting a little more purchasing power in 2013. The increase is called a cost of living adjustment (COLA), which in 2013 will amount to a 1.7 percent increase in benefits.
Protective Measure for Inflation
COLA is intended to help fixed-income beneficiaries keep pace with inflation. It is calculated from information provided by the U.S. Department of Labor Statistics, which tracks inflation by using a monthly system for measuring prices for consumer goods and services against how much of those products and services are being purchased by urban households. If there is no increase in a given year, there is no COLA for Social Security beneficiaries, which was the case during the Great Recession of 2009 and 2010.
COLA Once an Act of Congress
But, could you imagine never getting a cost-of-living increase? That’s how it used to be before legislation in 1972 made COLAs a year-to-year automatic adjustment for inflation starting in 1975. Before that, it used to take an act of Congress to decide when an adjustment was warranted. Your fixed income could have stayed the same for life, and inflation very likely could have shrunk your income to almost nothing.
For the very first beneficiaries in 1940, that is what they were dealt until adjustments were first made in 1950 and again in 1952 which, according to SSA, “doubled the value of Social Security benefits.”
The Social Security Web site provides detailed information on COLAs including its history, how COLA percentages are determined, and how much of an increase you can expect from a 1.7 percent adjustment to current benefits.