Inflation continues to tick up. It reached a high of 4.2 percent last month — that’s the highest it’s been in three years.
The Social Security Administration allows for an annual cost-of-living adjustment (COLA) to help keep up with inflation. According to an article by Legis1, the problem is that the “index used to calculate the annual inflation adjustment for Social Security benefits was designed to reflect the spending habits of working-age urban wage earners, not retirees.”
The article explains that under the Social Security Act, the COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The formula compares the average CPI-W for the third quarter of the current year against the highest third-quarter average ever recorded. It states that if “the current year’s figure is higher, a COLA is triggered. If not, benefits are held flat.” The good news is that benefits cannot be reduced, even if prices fall.
The article questions whether the CPI-W is the best tool for measuring inflation as it affects Social Security beneficiaries. Retirees spend proportionally more on healthcare and housing than workers. Instead, it suggests using the Consumer Price Index for the Elderly (CPI-E) because it “captures price changes affecting those 62 and older and has generally been found to grow slightly faster than the CPI-W. That difference, compounded over years, could mean meaningfully higher benefits for seniors.”
There are bills currently before Congress that call for switching to the CPI-E to calculate the annual Social Security COLA. But that’s not all that retirees need.
Council of Seniors is Here to Help Older Americans
Older Americans worked long and hard and deserve to live a comfortable retirement free from financial strain.
All of us here at the Council of Seniors want to improve retirees’ financial futures – and that starts with Congress enacting The SAVE Benefits Act. The passage of this bill can make up for Social Security cost-of-living adjustments (COLAs) that have let you down in recent years. If it passes, $581 will be returned to eligible seniors.
Sign our petition right now to show you’re on board with our effort.