When people think of COLA, they may picture a refreshing soda. But this isn’t that type of cola. Instead, when you see anything about COLA benefits, it’s referring to a cost-of-living adjustment. This adjustment can mean people get thousands of more dollars which can make a world of difference! So, let’s dive into what COLA payments are, when to expect them, who gets them, and more.
Your Guide to a COLA
COLA is the term used to talk about the cost-of-living adjustment that impacts Supplemental Security Income (SSI) and Social Security benefits. These adjustments are a result of inflation. They are a measure designed to help people during periods of inflation when it comes to programs that provide support.
How Much is a COLA?
Generally, the amount of these adjustments is worth a percentage that is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Before we continue, it’s important to understand what the CPI is. Basically it’s a way to measure inflation and it looks at the average prices of certain goods. So when there is a percentage increase in the CPI within a certain timeframe, it typically results in a COLA.
Was There a COLA for 2023?
Yes! In fact, there was a COLA for 2023. Which honestly should come as no surprise because so many people have been feeling the impacts of inflation across the country. The COLA is 8.7%. That is a solid amount which can lead to an average increase of over $100 for Social Security benefits.
Who Will Benefit from the 2023 COLA?
Luckily, every person who is on Social Security will see the benefits from a COLA increase. That’s because the whole point of a COLA is to make sure that benefits keep up with higher costs of living! So roughly 70 million people who benefit from Social Security or SSI will see the 8.7% increase!
When Will You See the COLA for 2023?
The exact date that people will be able to see the increase in their benefits will vary. Recipients should have already seen the increase in January 2023. How do they see this? Well they would just have seen the increase in their benefit amount once they got their payment. For those that benefit from Supplemental Security Income (SSI), payments are made on the 1st of the month. If the 1st of the month falls on a non-business day like a weekend then the payments will be provided the Friday before the 1st of the month.
On the other hand, it’s different for Social Security benefits (which refer to Retirement, Survivors, and Disability – a.k.a RSDI). The specific payment day for a person depends on their birthday. For example:
- People born on the 1st to the 10th day of their birth month get their payment on the second Wednesday of the month.
- Those born on the 11th to the 20th day of their birth month get their payment on the third Wednesday of the month.
- Finally individuals born on the 21st to the 31st day of their birth month get their payment on the fourth Wednesday of the month.
So for example, a person born on December 7th can expect their payment to be paid out on the second Wednesday of the month!
How Long Have COLAs Been Around?
It all started back in the 1970’s when inflation became a real problem child. There were plenty of COLAs that started happening with certain contracts like government benefits, compensation-related contracts, and so on. It’s basically an assembly line where the United States Bureau of Labor Statistics (BLS) will figure out the CPI-W. Once they do this then the Social Security Administration (SSA) will determine the COLA.
Is It Possible to Have No COLA?
Yes! There are times where a COLA does not happen. If the CPI shows that inflation is not high enough to require a COLA, then recipients will not see one! Basically, no CPI-W rise means no COLA boost.
A Provision Worth Noting
When talking about COLAs, it’s also important to bring up the Hold-Harmless Provision. It aims to protect certain recipients of Medicare. Basically, it places a limit on the yearly increase in premiums for Medicare Part B. The premiums are specifically in relation to those deducted from Social Security benefits. To put it in simple terms, this makes sure that the dollar amount of Social Security benefits that gets paid out after deductions doesn’t get lower even if there is a yearly increase in premiums for Part B of Medicare.
Are There Other COLAs to Be Aware Of?
Actually yes! Even though COLA is traditionally thought about in terms of SSI and Social Security benefits, there are actually employers who give a COLA. Usually, these COLAs are not permanent but employers like the United States military often provide these! For example, if there is an employee that has to work in a city that has a higher cost-of-living than where they live normally, then there may be a temporary COLA. This COLA will no longer be valid once the work assignment gets completed and that employee no longer has to work in a city with a larger cost-of-living.
If you see news about a COLA then you are likely seeing something about the cost-of-living adjustment that impacts SSI recipients and Social Security benefit recipients. For 2023, the COLA was 8.7%. People first saw this increase in January 2023. However, the specific date that they can continue to receive these increased payment amounts will depend on the program they are benefiting from. For example, SSI recipients can expect their payment on the 1st of the month (or the Friday before the 1st of the month if it’s on a weekend). On the other hand, SSA benefits will be paid out depending on a person’s birthday. It will either be the second, third, or fourth Wednesday of the month.
While a COLA may seem confusing, it’s actually pretty simple. Luckily, the SSA consistently provides up to date information on their website. They will be the best source of information if you want to learn more, have questions, and so on. However, in 2023, certain people can see a boost in how much they are getting which can provide a serious crutch!