Understanding Cost of Living Adjustment (COLA)
Are you a fixed income earner, a retiree, or a disability income receiver? The rising cost of living in terms of daily groceries, medical bills, rents, transport, etc. must be putting a real strain on your monthly expenses.
Here is some good news: Cost of Living Adjustment or COLA is an adjustment in your income so that you can maintain your living style. The primary purpose of COLA is to offset at least some impact of inflation so that you may retain your purchasing power.
Here are some important things that you should know about COLA:
- How is it calculated? It is calculated on a yearly basis from the changes in the Consumer Price Index (CPI-W) of the third quarter of the previous year to the third quarter of the current year. The percentage is set to counter the impact of inflation at the best possible level.
- Who gets this adjustment? Usually, all state and public pension plans have COLA built in and it is automatically updated on a yearly basis. Military personnel, federal, and public sector employees usually have such an allowance in their annual salary. Workers who are part of labor unions in private organizations may receive this adjustment as well, depending on their negotiations with their employers.
- How does it affect Social Security Disability (SSD) and Supplemental Security Income (SSI) receivers? SSD and SSI applicants earn fixed monthly incomes and with rising prices, their cost of living tends to increase manifold. With COLA, they can find some relief as inflation impact is minimized. This year the Social Security Administration (SSA) has confirmed that the adjustment amount is the largest sum paid out since 2009.
If you fall in the category of those individuals who do not receive COLA and are stuck with a fixed income, you may want to explore other options that offset or at least mitigate the inflationary pressure on your income. Other options include investments, stock schemes offered by employers, or other benefits that you may be entitled to.
It is strongly recommended to consult with relevant professionals so that you are aware of the possibilities open to you, and so that you can make well-informed decisions.
If you are disabled, and if you live in North or South Carolina, we will be happy to speak to you personally if you have questions, and probably to represent you when you first file a claim, or if you are turned down at any level in a claim for Social Security disability or SSI. Click here to contact us, or call us at 864-582-7882.
We serve clients throughout the Carolinas from our offices in Spartanburg, Greenville, and Columbia.