If you're a Social Security retiree, you're probably watching the inflation numbers like a hawk.

That's because Social Security benefits increase every year according to the COLA, or cost-of-living adjustment. And last week, the August inflation reading came in hotter than expected. The Consumer Price Index for All Urban Consumers (CPI-U), which is the inflation reading most closely followed by economists, rose 8.3% year over year, down from 8.5% in July but still higher than estimates of 8.1%. Also troubling was that core inflation, which excludes food and energy, remained elevated at 0.6% month over month and 6.3% year over year, showing that even prices for less volatile items like clothing or shelter are still rising quickly.

But Social Security's annual COLA is based on a different inflation measure, the CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers. The CPI-W index was up an even higher 8.7% year over year in August.

Continue reading

Source Fool.com