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The Social Security Administration recently announced a cost-of-living adjustment (COLA) for 2014. Social Security and Supplemental Security Income benefits for some 63 million Americans will increase by 1.5 percent.<\/p>\n
The ceiling on earnings subject to Social Security taxes will also increase \u2014 from $113,700 to $117,000. This will affect approximately 10 million of the estimated 165 million Americans who will pay into the Social Security system in 2014.<\/p>\n
COLA is designed to prevent inflation from eroding the purchasing power of benefits. It is based on the change in a price index known as the CPI-W from the third quarter of last year to the third quarter of the current year. If prices, as measured by the index, do not rise, no COLA is implemented.<\/p>\n
Cost-of-living adjustments were enacted as part of the 1972 Social Security Amendments. Prior to that, benefits only increased when Congress passed legislation for that specific purpose.<\/p>\n