Social Security's Cost-of-Living Adjustment Is Based on the CPI-W
The Fact
Social Security benefits are adjusted each year by a cost-of-living adjustment (COLA). The Social Security Administration bases the COLA on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), comparing the third quarter of one year with the third quarter of the year before.
What This Means
The yearly Social Security raise follows one government price index. That index measures the spending of working urban households, not specifically retirees.
Why It Matters
If your own costs rise faster than that index, the COLA will not fully cover them.
Sources
Social Security Administration. “Cost-of-Living Adjustment (COLA) Information.” https://www.ssa.gov/cola/