1. What is COLA?

COLA (Cost-of-Living Adjustment) is an increase in income that keeps up with the cost of living, typically based on the Consumer Price Index (CPI). It helps maintain purchasing power when inflation occurs.

2. How Does the Calculator Work?

The calculator uses the COLA formula:

Where:

• Current Salary — The present salary amount in dollars
• CPI Increase — The percentage increase in Consumer Price Index

Explanation: The calculation adjusts the current salary by the CPI percentage to determine the new salary needed to maintain equivalent purchasing power.

3. Importance of COLA Calculation

Details: COLA adjustments are crucial for maintaining real wages, pension benefits, and social security payments in the face of inflation.

4. Using the Calculator

Tips: Enter current salary in dollars and CPI increase as a percentage (e.g., enter 3.5 for 3.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How often is COLA typically applied?
A: COLA adjustments are usually made annually, often tied to the CPI changes from the previous year.

Q2: Is COLA the same as a raise?
A: No, COLA maintains purchasing power while a raise increases real income above inflation.

Q3: What's a typical CPI increase percentage?
A: Historically in the US, CPI increases average 2-3% annually, but can vary significantly.

Q4: Does COLA apply to all employees?
A: Not automatically - it depends on employer policies, union contracts, or government programs.

Q5: How does COLA affect retirement benefits?
A: Many pension plans and Social Security include COLA adjustments to protect against inflation.