How to Determine Social Security Increases

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How to Determine Social Security Increases. Each January, a cost-of-living adjustment (COLA) is applied to the amounts received as social security benefits. This percentage increase is computed after comparing the cost of living in the prior year's 3-month base period of July-August-September (J-A-S) to the current year J-A-S cost of living level. Compute the tentative annual increase, as well as interim rates, from data available online.

Access the COLA estimate information on the Social Security website (see Resources below). The COLA reflects price increases in the index for CPI-W (Urban Wage Earners and Clerical Workers).

Review the CPI-W data in the chart which shows the level of prices on a monthly basis for the current year-to-date and back to July of the prior year. The monthly data reflects an increase in prices over a base period from 1982 to 1984 which would equal 100.

Determine the average level of prices for the prior year base period by adding together the amounts in J-A-S and dividing the total by 3. For example, the amounts for J-A-S for 2007 are 203.700, 203.199, and 203.889 which total 610.788 and average 203.596.

Use the current year J-A-S amounts to arrive at an average as calculated in Step 3.

Divide the average in Step 4 by the average in Step 3 to arrive at the COLA percentage increase rounded to one decimal.

Apply this rate to your monthly social security benefit to determine your increased benefit for the following January.

Tips & Warnings

  • If the current year has not reached the September period, calculate an interim rate by dividing the currently available monthly level of prices for CPI-W by the 3-month base period as determined in Step 3. Remember the actual COLA rate will be determined when the J-A-S data becomes available, which could increase or decrease the interim percent rate.

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