Social Security benefits may increase each year based on inflation measured by the Consumer Price Index (CPI). These cost-of-living adjustments (COLAs) help retirees keep up with the rising cost of goods and services. Each October, the Social Security Administration announces the amount monthly benefits will increase starting the following January.
If the rate of inflation is zero or less, there may not be a COLA. Social Security recipients received no cost-of-living adjustment for benefits paid in 2016. Prior to 1975, benefit increases were set by legislation, not by formula. Since 1975, the highest COLA has been 14.3% at the end of 1980. The average of all years is 3.88%.
The Social Security Cost-of-Living Adjustment for 2017 will be available in 3 weeks, on or shortly after the September CPI figures are released on the morning of October 18th. The COLA uses CPI figures for July, August and September to create a 3rd quarter average, which is why the COLA is known before the calendar year is over.
Using the data currently available for just July and August, the COLA would be 0.26%. The Board of Trustees for the Social Security Trust Funds estimated the COLA payable starting in January 2017 between 0% and 0.70%. Over the next several years, the trustees estimate adjustments of 1.9% to 3.7%.