COLA stands for Cost of Living Adjustment and has been in place since 1975. Social Security benefits typically increase, albeit a fairly insignificant increase, each year based on the cost of living. This is determined by the Consumer Price Index (CPI). The CPI measures the average change in price that urban consumers pay over a period of time. Typically, the average amount of change in price increases, but the recent trend has shown a decline in the CPI. As a result, there is no COLA payable for 2016, and unfortunately there probably won’t be an increase until 2017 at the earliest.
You’re asking, how does this affect me? If you receive Social Security Disability benefits, you are typically on a fixed income. In order to maintain your purchasing power despite being on a fixed income, benefits usually increase as inflation rises. As stated above, how much benefits increase is determined by CPI. Because of the downward trend in the CPI resulting in no significant rise in inflation, there is no COLA this year. The good news is that despite a decline, your benefit amount won’t decrease; it will simply stay the same as last year. For SSI recipients, the maximum amount an individual can receive is $733. Keep in mind that not everyone receives the maximum amount because it is based on your household income.
While COLA increases are rarely significant, you may still find that you will have to cut back on spending in order to maintain your budget. Ways to do this may be to buy generic medications and generic prescriptions, store brand foods instead of name brand, or cut your cable or satellite for a few months. The best thing anyone can do for themselves, whether they are on a fixed income or not, is to create a budget and stick to it. There are tons of free personal budget templates online. Simply search “personal budget template”, and you’ll have your choice of so many options. You can find something that works for you.
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