Cost of Living Adjustment: 1.5%, Contribution Base for 2014: $117,000

With the release of the CPI report this morning, we now know the Cost of Living Adjustment (COLA), and the contribution base for 2014.

Currently CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is a discussion from Social Security on the current calculation (1.5% increase) and a list of previous Cost-of-Living Adjustments. Note: this is not the headline CPI-U.

The contribution and benefit base will be $117,000 in 2014.

SPECIAL NOTE on CPI-chained: There has been some discussion of switching from CPI-W to CPI-chained for COLA. This will not happen this year, but could happen in the next year or two, and the switch would impact future Cost-of-living adjustments, see: Cost of Living and CPI-Chained.

If CPI-chained was used instead of CPI-W, the increase would be 1.45% (probably rounded up to 1.5%).  CPI-chained would have minimal impact on any one year, but would reduce benefits over time.