Calculating the 2020 COLA

This is the time of the year that inflation figures pertaining to any cost-of-living-adjustment (COLA) for Social Security recipients and retired federal employees become relevant. The relevant measure for any COLA is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) compiled by the Burea of Labor Statistics.

This index increased by 0.20 percent in July 2019.

This means that the new CPI-W figure for July 2019 is 1.58 percent higher than the average CPI-W for the third quarter of 2018. The third quarter of 2018, under the formula used to determine any COLA increase in 2020, is important because it will be the yardstick used to determine the 2020 COLA.

The Social Security Administration calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year. The reason the fourth quarter is not used is because the fourth-quarter numbers are usually not available until mid-January. SSA has to make its COLA adjustment on January 1.

The 2019 COLA was 2.8 percent for Civil Service Retirement System (CSRS) annuities and Social Security benefits, and 2 percent for Federal Employees Retirement System (FERS) retirees. Under the FERS retirement program, when the CPI-W change is between 2 and 3 percent, the COLA awarded for the coming year is 2 percent. 

Here are the recent COLA increases by year:

• 2019: 2.8%
• 2018: 2.0%
• 2017: 0.3%
• 2016: 0%
• 2015: 1.7%
• 2014: 1.5%
• 2013: 1.7%
• 2012: 3.6%
• 2011: 0%
• 2010: 0%
• 2009: 5.8%

Those who benefit from the COLA increase (primarily retirees and Social Security recipients and not current federal employees) will be advised of the percentage increase for 2020 in mid-October.