There will likely be no COLA for 2016 for Social Security or Veterans benefits. The COLA amount is scheduled to be announced Thursday, but inflation has been so low this year that economists are predicting that there will be no increase for the third time in 6 years.
In the 40 years since the automatic benefit adjustment was introduced in 1975 when inflation was high, only 3 times has there been no increase: 2010, 2011, and now 2016. The annual cost of living adjustment is based on a government measure of inflation and has averaged about 4 percent since its introduction. The COLA is calculated by comparing prices for food, housing, clothing, transportation, energy, medical care, recreation and education in July, August and September each year with prices from the same three months from the previous year. If prices go up, benefits go up. If prices drop or stay flat, benefits stay the same. The numbers for July and August of 2015 show that, overall, consumer prices have fallen since 2014.