cost of living adjustments

Cost of Living Adjustments (COLAs) are changes made to income, such as wages or benefits, to keep pace with inflation and rising expenses. When prices for goods, services, and housing increase, COLAs help maintain your purchasing power by adjusting your income accordingly. This ensures that your standard of living remains relatively stable despite economic fluctuations. COLAs are commonly applied to Social Security, pensions, and employment contracts to protect individuals from the diminishing value of money over time. They are calculated based on changes in specific price indices, reflecting the overall cost of living increases in a given period.