What Is a Cost-of-Living Adjustment (COLA)?

A cost-of-living adjustment (COLA) is an increase to Social Security and Supplemental Security Income (SSI) to compensate for inflationary impacts. The percentage rise in the consumer price index for urban wage earners and clerical employees (CPI-W) for a certain period is usually used to calculate cost-of-living adjustments. So, if someone earned $10,000 in Social Security benefits last year and the COLA is 4.1 percent this year, their benefits will be $10,410 this year. The COLA for 2021 is 1.3 percent, bringing the payout to $10,130.