Increased Social Security Benefits Possible with New Cost-of-Living Adjustment: CPI-E in the Spotlight
The Consumer Price Index for the Elderly (CPI-E) is a potential game-changer for Social Security beneficiaries, as it could lead to increased benefits that better reflect the inflation experienced by older adults.
Currently, the Social Security Administration (SSA) calculates the annual Cost-of-Living Adjustment (COLA) based on data from the Bureau of Labor Statistics (BLS) and specifically the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, proponents argue that this index understates inflation for seniors because it does not fully capture the faster price increases in housing and medical care, which disproportionately affect older adults.
The Boosting Benefits and COLAs for Seniors Act, introduced into legislation in March 2024, aims to switch the COLA calculation to the CPI-E. This index differs from the CPI-W mainly in how the basket of goods is weighted to reflect spending patterns. The CPI-E uses the same categories of goods as the CPI-W but places greater weight on housing and health care, which are larger expense categories for older adults.
The bill has the backing of several organizations, including the Alliance for Retired Americans, the National Committee to Preserve Social Security and Medicare, and Social Security Works. If passed, the Boosting Benefits and COLAs for Seniors Act could result in higher Social Security benefit increases, helping older adults better keep pace with their true cost of living.
However, critics argue that calculating the COLA using the CPI-E instead of the broader CPI-W could disenfranchise people who collect Social Security benefits before the age of 62, including people with disabilities, surviving spouses, and their children.
It's important to note that if there is no percentage increase, there is no COLA increase. Benefit levels are never cut, even in a year-over-year price index drop. The SSA compares the average CPI-W for the third quarter of the current year with the average CPI-W for the previous year to determine the COLA percentage increase.
The Boosting Benefits and COLAs for Seniors Act also calls on the BLS to calculate and publish the CPI-E monthly, providing valuable data for understanding the cost of living for older adults.
Understanding the CPI-E is useful as it reflects what older adults spend money on and can help anticipate potential changes in the cost of health care and housing. If the Boosting Benefits and COLAs for Seniors Act becomes law, it could impact the way Social Security benefits are calculated and potentially increase payments.
However, the bill is still making its way through the legislative process, and it isn't clear if it will ever become law, especially with the Republicans in power. It's crucial for advocates to continue pushing for policies that prioritise the needs of older adults and help them maintain their standard of living.
Meanwhile, the SSA has predicted that Social Security will face insolvency in 2033, with the fund only covering 77% of the scheduled benefits. Addressing this issue is essential to ensure the long-term stability of Social Security and the financial security of older adults.
Table:
| Aspect | CPI-W | CPI-E | |-------------------------------|---------------------------------------|----------------------------------------| | Target population | Urban wage earners and clerical workers | Older adults (age 62+) | | Weighting focus | More weight on transportation, food | More weight on housing, health care | | Reflects spending patterns of | Working-age urban households | Retirees and elderly households | | Impact on Social Security COLA | Current standard; may understate seniors’ inflation | Proposed alternative; could lead to higher COLA for seniors |
[1] https://www.ssa.gov/oact/cola/index.html [2] https://www.ssa.gov/oact/cola/cpi.html [3] https://www.ssa.gov/oact/cola/cpi_e.html
- The Boosting Benefits and COLAs for Seniors Act, currently in legislative process, aims to switch the calculation of the Cost-of-Living Adjustment (COLA) in Social Security from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the Consumer Price Index for the Elderly (CPI-E), which could potentially lead to higher benefit increases for older adults, emphasizing their personal-finance needs.
- With the Boosting Benefits and COLAs for Seniors Act under consideration, there are discussions about the impact on various groups, such as people with disabilities, surviving spouses, and their children, as the legislation proposes a shift from the broad Consumer Price Index (CPI-W) to the CPI-E, which mainly focuses on the expenses of older adults in areas like finance, health care, and politics.
