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Social Security COLAs: Are Bigger Increases Coming?

The debate over Social Security continues to rage, as lawmakers argue about whether to expand or reduce benefits. In response to earlier efforts to reduce the rate of increase of Social Security cost of living adjustments, one new proposal actually could lead to bigger COLA increases in the future.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the idea of using a different measure of inflation to make Social Security COLAs. Currently, the Social Security Administration uses the regular Consumer Price Index to determine how much to raise benefits, and previous efforts to use a smaller measure called the Chained CPI has run into huge resistance. Yet some lawmakers think that using a version of the CPI that targets the expenses that elderly Americans have to pay is the smartest move, with the so-called CPI-E arguably reflecting their actual inflation more closely. Dan points out that opponents object to raising the wage base on which Social Security taxes are imposed to pay for the measure, and he concludes that the debate is likely to rage on for years.

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Read/Post Comments (45) | Recommend This Article (20)

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  • Report this Comment On March 23, 2014, at 11:06 AM, bobthegoodone wrote:

    Social Security needs to address the costs every senior has ! My water bill up 50 % , my electric up 38 %, meat costs in my area up 40 % or more just in the last 6 months . We are told there is no increase in the cost of living but I assure you they are lying through their teeth !!

  • Report this Comment On March 23, 2014, at 11:22 AM, bfitz wrote:

    Yes - bigger - much, much bigger.......that's the ticket.............Codger Brian

  • Report this Comment On March 23, 2014, at 11:31 AM, jolo wrote:

    Right when pigs fly! if the cuts were made where they should be made and not with the poorest and highest tax payers on earth we all may be able to live a little better.

    but the politicians/rich/ultra rich make sure they get there money before anything else is done!

    if we paid politicians what they are worth they would be paying us back for eternity. " they are useless money grubbing people with no morals or ethics."

  • Report this Comment On March 23, 2014, at 11:46 AM, RobAllen wrote:

    Whats so hard for the Congress to understand it takes money to run the country ? The Republican

    request a lot of Corporate welfare to subsidy the

    Oil companies, the banks, the farms, they scream

    loud when we use money for Jobs stimulus, for

    medicare, for S.S, for Housing, to take care of our

    people like they do in the Nordic countries of :

    Denmark, Finland, Holland, Norway, Sweden

    We need to taxe the people 40%, for these :

    1) S.S Fund 10%

    2) Medicare 10%

    3) All others 20%


    Companies that bring home jobs shall have

    Flat 15% income tax, if not they must pay

    Flat 30% ( they can cheat with loopoles )

    Otherwise American will go on for many years

    suffering to go.

  • Report this Comment On March 23, 2014, at 11:49 AM, Waldo wrote:

    Many say that Social Security was never meant to be the sole source of income for retirees. But the sad truth is for several million, it is. There needs to be not only a huge increase in the COLA, but it needs to reflect actual realities such as utility increases, property tax increases, food costs etc. How the elderly are treated speaks volumes for a country's morals and values.

  • Report this Comment On March 23, 2014, at 12:02 PM, JohnWhite1000 wrote:

    COLA is absolutely necessary for us on Social Security. The problem is the method used to calculate it. It doesn't take into account the real cost of living increases (water bills, property bills, gas to get to dr. appts., food prices - btw: while packaging decrease in size - and I could go on and on). What Congress doesn't realize is a very important point. When you provide truly adequate COLA from year-to-year, most (if not all) of that increase goes right back INTO THE ECONOMY! Trust me!!! (The COLA increases don't go into some lucrative savings account. It's used IMMEDIATELY at the grocery store and clothes stores to buy new underwear/socks/etc. That can only boast the economy, not hurt it!)

  • Report this Comment On March 23, 2014, at 12:13 PM, ugo wrote:

    Seems like the ones on the dole are the only ones getting raises. Who is going to pay for it? SS is just another wealthredistribution scam on workers. People feel entitled to my check because they had taxes taken from theirs and redistributed to others. This culture has to stop. No raises, phase the program out by cutting its funding.

  • Report this Comment On March 23, 2014, at 12:13 PM, JohnWhite1000 wrote:

    I might add, in recent years, the COLA hasn't even kept up with the real increase in elderly/disabled SS income, thus the economy has no chance to benefit from what an adequate increase would offer. I.E. My water bill rate and condo fee both increased, which means I need to wear socks with holes in it, instead of buying new ones. I know this is funny to some people, but some economists no exactly what I'm talking about. (You really don't need to be an economists to understand this.) Adequate COLA increases allow the low-income to fuel the economy. Believe me, it's more that just socks that need replacing. So, while everyone is always trying to figure out how to drive consumer spending, there's a huge block of people ready to spend money, if provided adequate COLAs! Think about it Congress and decision makers. If you want to boot the economy in a positive way, you have an army of people ready, wanting and needing to spend, "if" you would provide adequate cost-of-living adjustments! (btw: Conversely, inadequate COLAs only put this spending on the back burner and when it truly doesn't keep up year-to-year, each year the low-income people contribute less and less to the economy.)

  • Report this Comment On March 23, 2014, at 12:24 PM, JohnWhite1000 wrote:

    For those who make silly comments like do away with programs like Social Security, you're making a critical mistake in reasoning. You don't throw the baby out with the bath water. There's nothing wrong with the baby, it's the bath water that needs to be replenished and cleaned. So, changes to Social Security support/funding may be necessary, but throwing people's retirement benefits out the window just because some people are short-sighted and ill-informed is not the way to go. I'll tell you this. If you haven't seen the PBS Frontline special on the 401K scandal, you'll be praying that the government NEVER does away with social security. Speaking about scams, whoever convinced this country that joining retirement savings at the hip with the stock market has pulled off one of the biggest scams in this country and shame on the last George Bush to suggest that this is the way to go. The stock market and the big players CONTROL the stock market and there is so much fraud in this space, it isn't even funny! Some people need to wake up, Social Security is a worth-while program and it elevates our country about those who would sooner throw the elderly out on the street - watch the news people!

  • Report this Comment On March 23, 2014, at 12:28 PM, JohnWhite1000 wrote:

    Government waste is an expression that gets used so much, it then over-flows into legitimate programs, like Social Security, Medicare, etc. "If" true "government waste" was addressed it would stagger any citizen of this fine country. So, I say to the Congress, the Senate, and the President, let's get serious about true government waste!

  • Report this Comment On March 23, 2014, at 12:32 PM, Jayeverett wrote:

    What do we expect when the larger percentage of Americans have no clue as to what the congress receives as a pay package. Have you ever spent the effort trying to find out? It will not be easy because even the MEDIA will not print it. This should be made public so that you can see that their deal is so good that they will not rock the boat by revealing just what it is. Do they have Social Security (NO) but are probably doubling dipping with a second job that will put them on the SS rolls in addition to their Government Pension. And some also have a Military Pension (Triple dipping). They have no worry or concern except how to buy votes. Money? What Money? They just print more if needed. It is all paper backed up by a guarantee from the Congress (Printer). Are you starting to get the idea???

  • Report this Comment On March 23, 2014, at 12:36 PM, Jayeverett wrote:

    Oh! One more thing. Dan, if you are so smart why don't you tell us what the Congress pay packages are?

  • Report this Comment On March 23, 2014, at 12:58 PM, LSinger wrote:

    It is true that SS should not be counted on to be the whole of a persons retirement. That is not why an increase is needed. The formula for determining the COLA needs to be revamped. As for the ones who assume that SS will be large enough to retire on, we need to educate them and teach them how to plan, not just buy, buy, a little saved in the younger years is a good basis for retirement. We worked for years, raised a family, saved our money and at retirement age took our SS and pension. It is stretched pretty thin, but for now we are o.k. Time will tell

  • Report this Comment On March 23, 2014, at 1:35 PM, Johntheold wrote:

    A COLA just keeps you at the same place. It is not an increase. SS or any other payment should reflect the cost of living or be described as a cut.

  • Report this Comment On March 23, 2014, at 2:47 PM, Akhter53 wrote:

    I get $335.00+167.00=$5 502.00 per month will the Social Security informed all of us how we can manage into this accounts.

    Will you please let us know or any one can informed us about. This is they way peoples who do not get the right feeding or right information they always try to grab money from others and that's why the criminals takes places in the society.

    This is going on for last 100 years and it must be settled by the government not the Immigration Bill for the laws breakers.

  • Report this Comment On March 23, 2014, at 3:00 PM, foxielady74 wrote:

    I am a Widow, and my husband retired from military service, and when he died his pension stopped.

    I only get some of his S.S. and a pittance of my own. I only draw $879 S.S. and my savings interest is at, .0.600% which only pays me $50.00 or less if it is a short month on the calendar. Can you live on $900.00 a month and pay house insurance, auto insurance, utitlities, and food for a diabetic and my guard dog. Then add a vet bill ever so often for shots. Repair on your auto, and gass for it? There are some seniors drawing far less and I don't know how they survive, really. One other thing, they take out $104.00 a month for medicare premium. I'm below the poverty level in income.

    So how are you doing?

  • Report this Comment On March 23, 2014, at 3:11 PM, trayec wrote:

    the only way one could get SS and SSI to help is to an illegal.

    I know few that are here less then 5 years and are

    around 40 years old and getting more than me ,

    as I work my whole and contribute.

    one lady gets $750.00 per child she has 2

    free health insurance and food stamps also live in a

    very nice apartment and only pay $75.00 per month,

    what a great deal ,no wonder they are fighting to stay,

  • Report this Comment On March 23, 2014, at 4:01 PM, yooperintx wrote:

    Jayeverett - Have you really taken the effort to find out about the pay package for Members of Congress? It really is not hard to find as it is public information. The base pay for MoC is $174,000 per year and has not been raised since January 2009. A few in leadership positions get more. Members of Congress have been in SS since the 1980s when the old Civil Service Retirement System was replaced by the Federal Employees Retirement System. FERS includes SS, a contributory retirement and the optional Thrift Savings Plan which is similar to a 401k. They also pay for their health insurance and since January this year, they have had to go through the ACA to get it instead of getting it through the Federal Employees Health Benefits Program. Again, this information is readily available, all you have to do is look for it. Oh, and very few Members of Congress are retired military, most have never served a day in the military.

  • Report this Comment On March 23, 2014, at 4:14 PM, yooperintx wrote:

    foxielady74 - When did your husband retire from the military? Starting in 1953, survivors could be covered by the Uniformed Services Contingencies Option Act. Starting in 1961 is was replaced by the Retired Serviceman’s Family Protection Plan (RSFPP). That was changed in 1972 and is now the Survivor Benefit Plan (SBP). Participation in the SBP is mandatory unless the spouse agrees with the retiring military member not to participate. The SBP provides up to 55% of the retirees pension to the survivor.

  • Report this Comment On March 23, 2014, at 4:20 PM, LadyMantle wrote:

    Boomers kept this economy going for 50 years and will probably keep it going for another 50 providing SS keeps up with COLA. Most boomers continue to work beyond retirement and keep contributing to SS. We are probably still the most educated demographic in America and also because we came of age in the digital era, most of us are technophiles with skills, knowledge and experience unsurpassed even by today's standards.

  • Report this Comment On March 23, 2014, at 4:23 PM, yooperintx wrote:

    trayec - Illegals are not eligible for SS or SSI. A small percentage of legal resident aliens do qualify for SSI. You only get SS if you qualify by your work history or your spouses work history. Do you know the difference between SS and SSI? A lot of people don't. SSI is designed to help aged, blind, and disabled people, who have little or no income; and It is administered by SS but is not paid from SS funds but from the general fund.

  • Report this Comment On March 23, 2014, at 5:21 PM, Jimmyacorn wrote:

    SS COLA increases mean higher Medicare deductions. If Medicare is going broke why not just give it all to Medicare. I mean come on now, a $20 COLA doesn't do me any good if Medicare is just going to get $12 of it.

    What? You have about 850,000 getting COLA to the tune of approx. $17.00 each. What the heck does that amount to? About $850,000. Just give it to Medicare or put it back into SS.

  • Report this Comment On March 23, 2014, at 5:22 PM, Jimmyacorn wrote:

    Sorry, I meant to say "About a million dollars".

  • Report this Comment On March 23, 2014, at 5:32 PM, pwm02176 wrote:

    Folks; don't hold your breath waiting on a larger COLA....not going to happen.

  • Report this Comment On March 23, 2014, at 5:56 PM, amosnme wrote:

    If the cost of living hasn't gone up, as the politicians are trying to tell us, why do they get big increases in cost of living wages? They need to try living on Social Security and surviving---without their out of country savings and in country savings, money paid by idiots that want them to speak, etc. They say that people are going to die due to lack of income, health care, mental health care and food stamps. I'm not sure that the majority want to live if this is the way it's going to stay. When someone dies before they begin receiving their SS retirement, where does that money go that the person paid in all of their working life? The government has no right to decide anything about SS. It's not theirs to give or to take.

  • Report this Comment On March 23, 2014, at 6:28 PM, autocompanydude wrote:

    It seems quite clear the costs for senior citizens as a group are not similar in profile to those fully employed, without the challenges that seniors face that most commonly do not apply to the broad population. So how does this get accounted for? Or does this disparity not get considered. And if it is not appropriately factored in, why not?

  • Report this Comment On March 23, 2014, at 6:31 PM, almosthomeless wrote:

    I need every COLA and at the max amount.. Every year my rent goes up 20 to 30 dollars per month, my co-pays for doctor visits, specialist medical visits, ER trips and medication goes up. The cost of food goes up and I don't receive food stamps. Everything I need to survive is paid out of my meager SS allotment. Now it is my opinion that when welfare reforms were put into place and cash payments were limited to 5 years, many of these clever welfare parents put their children on SS, saying they were crazy or had ADD or what every condition that back in my day, good parenting took care of. These loop holes should be closed and another way to take care of these kids on the SS rolls should be found. I worked all my adult years and now I worry if I have enough for grocery after I pay to keep a roof over my head, many doctors, electric, gas, etc. Please let us seniors go out without having the burden of survival worries, I don't want to live under a bridge.

  • Report this Comment On March 23, 2014, at 7:49 PM, mrmaximo wrote:

    ever since the fool 0bama came to power the annual ss raise has been next to nothing. hes spending all the money on his and michelles vacations. building soccor fields for the terrorists and that damned obamacare. we need a real president not a community organizer.

  • Report this Comment On March 23, 2014, at 8:26 PM, lindag250 wrote:

    My husband is disabled -- Social Security is not just used by retirees. His out go increases each and every year. Medications, doctor co-pays, medical insurance through his former employer, etc. Let's not mention the fact that food has increased, rent continues to increase (landlords are much greedier than they used to be since a lot of properties are now owned and run by huge corporations), utilities continue to increase, etc. Each year, we have to make do with less and less money. We go out once in a while, but not often because of costs. Yes, it would be nice for social security pay to increase to better care for him. I'll be retiring in about 20 years, well in to my 70's. Don't know if my husband will still be alive or not but I know that his medical needs will be very high by then. If I get sick, we're up a creek without the proverbial paddle.

  • Report this Comment On March 23, 2014, at 8:26 PM, GrayPlayer wrote:

    Cost of living increases should be adjusted for changes in quantities. Tuna went six ounces to five,

    Fruits and vegetables went from 16-ounce cans to cans as light as 11 ounces.

    Used to be a can of tuna made two sandwiches now lucky to get one.

    Altering plastic jars to "appear" the same size BUT hidden from view is a scoop in the bottom, reducing contents.

    Government needs to monitor price per ounce, pound and liquid measurement also. Standardize what manufacturers use in figuring whether contents will be listed by ounces, pounds, pints, quarts or gallons.

  • Report this Comment On March 23, 2014, at 8:59 PM, bkmobal wrote:

    Maybe for a year or two up until the election but after that the US is done:

    "The Congressional Budget Office projects that interest will be $233 billion this year, or 1.3% as a share of the economy.

    By 2024, it will reach $880 billion, or 3.3% of GDP. That means interest will account for the lion's share of the $1.1 trillion deficit projected for that year and will come close to what will be spent on Medicare."

    The CBO projects that under current policies, public debt will reach $21 trillion -- or 79% of GDP -- by 2024. That would be its highest level in more than 75 years and would leave debt at nearly double its long-term average of 40% of GDP.

    "The crushing burden of debt is driven primarily by the nation’s largest entitlement programs – Social Security, Medicare, and Medicaid – along with the compounding growth in interest payments on the debt. Government spending on health care entitlements, Social Security, and interest on the national debt will consume 100 percent of total revenues by 2025."

  • Report this Comment On March 23, 2014, at 9:42 PM, djm20 wrote:

    A large percentage of people would be assisted if Social Security income were not subject to federal taxation. This double taxation is not only unfair but it is depriving people of much needed income who are directly in the middle class and not 'rich' by any measure.

    Write Congress and tell them to suppoert H.R.3894 - the Senior Citizens Tax Elimination Act.

  • Report this Comment On March 23, 2014, at 9:47 PM, yooperintx wrote:

    amosnme - Congress has not had an increase since January 2009. You can find that out easily on the internet, just make sure you look at credible sites and don't rely on chain emails. You also seem to have wrong idea on how SS works. Current taxpayers are paying for the retirement of current retirees. When you retire, then current workers will be paying for your retirement. There is no pot of money with your name on it.

  • Report this Comment On March 23, 2014, at 10:12 PM, rbrb45rf wrote:

    Obama supporters will go hysterical over this well sourced list of 608 examples of his lying, lawbreaking, corruption, cronyism, etc.

  • Report this Comment On March 23, 2014, at 11:31 PM, harrryh44 wrote:

    My grocery bill, electric has gone up and gas who can afford to go anywhere other than the doctor, the grocery store and pharmacy. I am one of the lucky ones that doesn't still have a mortgage. I don't know how or why they are twisting everything about SS. SS was set up not to be touched. No one was suppose to be able to "BORROW" from it and the government voted that out and are using the funds to fund other countries and anyone but their own citizens. Time to put a stop to that.

  • Report this Comment On March 24, 2014, at 1:10 AM, panch wrote:

    want to hear something outrages?? we got a nineteen dollar COLA , and it is not even enough to keep us in toilet paper ,let alone food and medical,. Plus our bills. what is so American about that?

  • Report this Comment On March 24, 2014, at 1:45 AM, greyhound44 wrote:

    If you visit, you will see that all the US Federal government generated economic data is absolute BS!

    US unemployment is 23.2 % (month end Feb)

    US annual inflation is 10.3 + %

    Get your butts and assets out of the sorry USA!

    retired expatriate (10.8 years) MD: NBME; ABIM; ABNM; ABR w/spec comp NR

  • Report this Comment On March 24, 2014, at 5:29 AM, kimmy wrote:


  • Report this Comment On March 24, 2014, at 8:44 AM, Localyokul wrote:

    With the current COLA method of figuring increases , more and more seniors are falling below the poverty level. Then they need assistance such as section 8 housing and food stamps. When Congress decides to work together (if ever) a cost of living increase that actually accounts for increases in Food, real-estate taxes and car insurance, electricity, water and sewer etc.

    We can only hope for a realistic method of figuring

    COLA increases for the future.

  • Report this Comment On March 24, 2014, at 10:06 AM, sogole wrote:

    Why do we give money to illegals and foreign countries but yet deprive our own older people?

  • Report this Comment On March 24, 2014, at 11:32 AM, sprag22 wrote:

    stop giving all the money away to all the sand negors in other countries and pay back SS the money they stole years ago damn Washington crooks

  • Report this Comment On March 24, 2014, at 1:22 PM, nmwander wrote:

    Start a rumour that the Dems are gonna increase SS benefits!

    Thats one way to ensure Democrat Victories later this year!

    "47% of Americans depend on a govt check."

  • Report this Comment On March 24, 2014, at 1:34 PM, WilliamLarsen wrote:

    COLA is going to zero in less than twenty years period. The statute that governs COLA has three criteria.

    1. The CPI must be larger than any previous CPI.

    2. When the CPI is lower in October than the previous CPI in October, COLA is zero.

    3. When the Social Security OASI trust fund to Social Security OASI expense for that year ratio is projected to be less than 30%, then for each 1 percentage point decrease below 30% there is a corresponding 10% reduction in COLA. When this ratio reaches 20%, the COLA reduction will be 100% and COLA will cease to exist.

    When the SSA states that it can pay 75% of scheduled benefits when the trust fund is exhausted in 2033, there will be no COLA.

    Those years just prior to the trust fund being exhausted will see reduced COLA due to Federal Statute governing COLA.

    Each year after 2033, the ability for OASI to pay scheduled benefits will decrease until equilibrium in the birth rate per woman has been reached. Currently the 2.1 births per woman which began in late 70's will be fully reached around 2055 to 2060 and at that time, payable scheduled benefits will be about 60% without COLA.

    How do you like Social Security now?

  • Report this Comment On March 24, 2014, at 1:43 PM, WilliamLarsen wrote:

    COLA is not meant to maintain your standard of living with that of the economy. It was meant solely to enable you to buy the same basket of goods that were available when you turned 60. So if you turned 60 in 1990, then today COLA has allowed you to buy the same basket of goods that were available in 1990. For those goods and services that were added after 1990, those are not in your basket of goods that COLA covers.

    The items that changed in your basket of goods are many: Medicine, Services, Housing, technology, etc. It is your choice if you do not want to buy the same basket of goods, but it also your choice that you may run out of money buying outside your basket.

    Now if you want to maintain your ability to buy the new basket of goods each year, you need a replacement rate that rises with the economy - the SSA wage growth. However, if you wanted this you needed to pay a much higher SS-OASI tax while you were working.

    For those who were born after 1985 you can expect to receive 29 cents in OASI benefits for each combined $1 in payroll tax and US Treasury Rate theoretically paid on your payroll taxes. For those born prior to 1938, you have lived high on the hog receiving up to $18 per combined tax and interest. This is called the legacy debt; paying benefits far in excess of taxes paid by early cohorts in order to pay meaningful benefits. This is the definition of a Ponzi Scheme.

  • Report this Comment On March 24, 2014, at 10:08 PM, RobAllen wrote:

    Unless millions of American demand changes by Congress this country will be in deep troubles with

    +17 trillions in deficit, and because we have to pay

    interests on this debt its going to wipe out these

    programs : S.S, Medicare, Unemployed benefit,

    Housing etc . . . and the retired American workers

    will end up with nothing.

    All of the needed changes are :

    a) Require companies to bring home 70%

    of their total Jobs to get low taxes, and it

    shall be flat rate with no loopoles.

    b) When the US has more Jobs we can pay

    down the deficits.

    c) Increase personal income taxes to 40%.

    d) 10% of that will go to the S.S

    e) 10% of that will go to the Medicare.

    f) 20% of that will go to all other programs.

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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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