How is inflation applied to Social Security income?
Learn how inflation impacts your Social Security income and how it's calculated to keep up with the rising cost of living.
Last published on: September 03, 2025
Social Security income that is entered using Income Lab's Social Security inputs are all treated as adjusted for inflation. For projections, that means Social Security is treated as providing a cash flow that keeps up with inflation and, in nominal dollars, grows at the assumed inflation rate.
For parts of the app that show future projections, you can view future projections in today's dollars ("real" dollars, which strip away future growth due to inflation) or future dollars ("nominal" dollars, which include future growth due to inflation).
Because Social Security income is adjusted for inflation, when viewed in "real" dollars, these amounts stay the same in Life Hub and the Income Sourcing graph. For example, if a client received a benefit of $2,500/month in today's dollars, the Income Sourcing graph would show $2,500 in each month of the plan and Life Hub would show $30,000 for each complete calendar year. (Of course, Social Security benefit amounts can change mid-plan if the plan includes a change to a spousal or survivor benefit.)
When viewed in "nominal" dollars, Social Security benefit amounts will rise at the assumed average inflation rate. (If you are using Regime-Based Monte Carlo in the plan, benefit amounts will reflect near-term assumed average inflation in the near-term period and long-term in the long-term period.)
If an implemented plan includes Social Security income, the app will automatically apply the actual Social Security COLA each January. For example, a benefit that was $2,500/month in 2022 would automatically change to $2,717.50/month in January 2023, with the application of a 8.7% COLA. Therefore, though Social Security cash flows use inflation assumptions for analysis and display, over time these cash flows will reflect the actual inflation adjustments that have been applied, even when these differ from the plan's assumptions.
For parts of the app that show future projections, you can view future projections in today's dollars ("real" dollars, which strip away future growth due to inflation) or future dollars ("nominal" dollars, which include future growth due to inflation).
Because Social Security income is adjusted for inflation, when viewed in "real" dollars, these amounts stay the same in Life Hub and the Income Sourcing graph. For example, if a client received a benefit of $2,500/month in today's dollars, the Income Sourcing graph would show $2,500 in each month of the plan and Life Hub would show $30,000 for each complete calendar year. (Of course, Social Security benefit amounts can change mid-plan if the plan includes a change to a spousal or survivor benefit.)
When viewed in "nominal" dollars, Social Security benefit amounts will rise at the assumed average inflation rate. (If you are using Regime-Based Monte Carlo in the plan, benefit amounts will reflect near-term assumed average inflation in the near-term period and long-term in the long-term period.)
If an implemented plan includes Social Security income, the app will automatically apply the actual Social Security COLA each January. For example, a benefit that was $2,500/month in 2022 would automatically change to $2,717.50/month in January 2023, with the application of a 8.7% COLA. Therefore, though Social Security cash flows use inflation assumptions for analysis and display, over time these cash flows will reflect the actual inflation adjustments that have been applied, even when these differ from the plan's assumptions.