A Cost of Living Adjustment (COLA) is an increase in income that helps individuals keep up with rising prices of goods and services. This adjustment is often applied to salaries, pensions, and social security benefits to ensure that purchasing power remains stable over time. COLAs are typically based on inflation rates, which measure how much prices have increased over a specific period. For example, if the inflation rate is high, a COLA may be implemented to help workers and retirees maintain their standard of living despite increased costs for essentials like food, housing, and healthcare.