How is the cost of living adjustment (COLA) determined for my Social Security benefit? Robert 'Bob' Powell answers this question as part of Decoding Retirement's special segment, Ask Bob.

Care Right Inc. Founder Annalee Kruger joined Robert 'Bob' Powell on Decoding Retirement to discuss aging in place, vulnerabilities in elder care, long-term care insurance, the critical role of caregivers, aging plans, and more.

Question:

How does Social Security determine what the cost of living adjustment (COLA) will be on my Social Security benefit?

Answer:

The Social Security Act specifies a formula for determining COLA. According to the formula, COLAs are based on increases in the Consumer Price Index for urban wage earners and clerical workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.

A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective.

If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA for the year. In 2024, the COLA was 3.2%.

If you've got questions about money or retirement, email us at AskBob@yahoofinance.com.

Retirement planning doesn’t mean locking up your money for a rainy day and forgetting about it. Planning your future means reacting to events today. Decoding Retirement gives you the tools to navigate the years ahead, and take action now!

Yahoo Finance's Decoding Retirement is hosted by Robert Powell, and produced by Zach Faulds.

Find more episodes of Decoding Retirement at https://finance.yahoo.com/videos/series/decoding-retirement.

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Editor's note: This post was written by Zach Faulds.