COLA stands for “cost of living adjustment”, an important term when it comes to retirement benefits – whether those benefits come from your employer-provided pension or from Social Security.
It is just what it sounds like – an adjustment in the amount of benefits you’ll receive each month once you retire, based on the increase in the cost of living.
Employer Pensions
If you’re entitled to a pension from your employer, you’ll want to check with your company to find out whether the pension is subject to cost of living adjustments, and, if so, when those adjustments are applied.
Social Security
For Social Security benefits, COLAs are based on the consumer price index. This index tracks inflation; so, if inflation goes up, you’ll get a cost of living adjustment for that year. If not, you’re out of luck.
For 2011, like last year, there will be no Social Security cost of living adjustment, because the consumer price index has shown no inflation.
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