# Calculating Your Cost of Living Adjustments for Social Security

As you are probably aware, each year your Social Security benefits can be increased by a factor that helps to keep up with the rate of inflation – so that your benefit’s purchasing power doesn’t decrease over time.  These are called Cost Of Living Adjustments, COLAs for short.  The last increase was for 2009, an increase of 5.8% – for 2010 there was no COLA.  But how are those adjustments to your benefits calculated?

### Calculating the COLA

There is an index, compiled and managed by the Bureau of Labor Statistics, called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.  This index, or rather changes to the index, gauges the fluctuations in those wages over time.  Each December, SSA looks at the CPI-W level for the third quarter of that year (averaging July, August and September), and compares it to the same level for the previous year’s third quarter.  The percentage of increase, if any, is then used as COLA for Social Security benefits.  This is an automatic process, no action is required by Congress to enact the increases over time. As an example, the CPI-W average for the third quarter of 2009 was 211.001, and for the same period in 2008 the average was 215.495.  Comparing the two amounts we see that there has actually been a decrease in the CPI-W.  This is why there was no COLA for Social Security benefits in 2010. For the most recent example of an increase, the CPI-W for the third quarter of 2007 was approximately 203.681.  When you compare that number to the 2008 third quarter figure (215.495), you come up with an increase of 5.8% – which is what the COLA was for 2009.

### How it’s applied

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