Cost of Living Adjustments (COLA)

Cost of Living Adjustments (COLA) are periodic increases in income, such as social security benefits or wages, designed to help maintain purchasing power amid inflation. When prices for goods and services rise over time, COLA ensures that income keeps pace, preventing real income from decreasing. Typically, COLA is calculated based on a widely recognized measure of inflation, like the Consumer Price Index. This adjustment helps individuals and retirees avoid the erosion of their income's value due to the rising costs of everyday essentials.