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Cost of Living Adjustment Calculator 2018

Reviewed by Calculator Editorial Team

Use this cost of living adjustment calculator to determine your 2018 COLA based on your current salary and the Consumer Price Index (CPI) for that year. Understanding how inflation affects your pay can help you budget effectively and plan for future adjustments.

What is COLA?

COLA stands for Cost of Living Adjustment. It's a periodic increase in wages or benefits to offset the effects of inflation. In the United States, COLA is typically applied to Social Security benefits, but it can also apply to other forms of compensation.

The purpose of COLA is to ensure that your purchasing power remains consistent over time, even as prices for goods and services rise. Without COLA, your salary would buy less over time due to inflation.

How to Calculate COLA

Calculating your COLA involves several steps:

  1. Determine your current salary or benefit amount
  2. Find the CPI for the year you're calculating COLA for (2018 in this case)
  3. Calculate the percentage increase in CPI from the previous year
  4. Apply that percentage increase to your current salary

The formula for COLA is:

COLA = Current Salary × (CPI Increase Percentage / 100)

For example, if your current salary is $50,000 and the CPI increased by 2.5% in 2018, your COLA would be $1,250.

COLA Formula

The standard formula for calculating COLA is:

COLA = Current Salary × (CPI Increase Percentage / 100)

Where:

  • Current Salary - Your current annual compensation
  • CPI Increase Percentage - The percentage increase in the Consumer Price Index from the previous year to 2018

For 2018, the CPI increase was approximately 2.1% from the previous year.

COLA Examples

Let's look at a few examples to illustrate how COLA works:

Example 1: Standard Salary

Current salary: $45,000

CPI increase: 2.1%

COLA: $45,000 × 0.021 = $945

Adjusted salary: $45,000 + $945 = $45,945

Example 2: Higher Salary

Current salary: $80,000

CPI increase: 2.1%

COLA: $80,000 × 0.021 = $1,680

Adjusted salary: $80,000 + $1,680 = $81,680

Example 3: Lower Salary

Current salary: $30,000

CPI increase: 2.1%

COLA: $30,000 × 0.021 = $630

Adjusted salary: $30,000 + $630 = $30,630

Key Factors Affecting COLA

Several factors influence the amount of COLA you receive:

  1. Inflation Rate: Higher inflation means a larger COLA percentage
  2. Current Salary: Higher salaries typically receive proportionally larger COLA amounts
  3. COLA Caps: Some benefit programs have maximum COLA limits
  4. Economic Conditions: Recessions or economic downturns may affect COLA calculations

In 2018, the CPI increase was relatively modest at 2.1%, which resulted in smaller COLA amounts compared to years with higher inflation.

COLA FAQ

Frequently Asked Questions

How often is COLA applied?
COLA is typically applied annually, based on the CPI for the previous year. Some benefits may receive more frequent adjustments.
Is COLA the same for everyone?
No, COLA varies based on individual salaries and the specific CPI increase for the year. Higher earners generally receive larger COLA amounts.
Can COLA be negative?
Yes, if the CPI decreases from the previous year, the COLA percentage will be negative, resulting in a reduction rather than an increase.
How does COLA affect my taxes?
COLA increases are generally taxable as ordinary income, though some benefit programs may have different tax treatment rules.
Where can I find historical CPI data?
You can find historical CPI data on the Bureau of Labor Statistics website or through the U.S. Census Bureau.