What Exactly Is the CPI-E? And Why Senior Expenses Should Matter the Most?
The Social Security Expansion Act calls for changing the way the annual Social Security cost-of-living adjustment (COLA) is calculated. The formula currently uses the Consumer Price Index for Urban Wage Earners (CPI-W). But the bill’s sponsors want to see that changed to use the Consumer Price Index for the Elderly (CPI-E). It takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare — and offers a more realistic COLA for retirees.
Definition
The Bureau of Labor Statistics calculates a research price index called the Consumer Price Index for Americans 62 years of age and older, or R-CPI-E. It is used to measure price changes specifically based on the spending patterns of the elderly. This is why supporters of the Social Security Expansion Act believe it should be used when calculating the COLA.
CPI-W vs. CPI-E
Both the CPI-W and CPI-E measure spending in eight main categories: housing, transportation, food and beverages, medical care, recreation, education and communication, apparel, and other good and services (which is basically all the stuff that doesn’t fit into one of the other categories).
While each index measures the same goods and services, they give different weightings to the categories. This is important because, as SocialSecurityIntelligence.com points out, retirees spend their money very differently than individuals who are not retired. Retirees tend to spend more on healthcare and housing, and less on things like gasoline, education, and consumer electronics.
Call for Change
If enacted, the Social Security Expansion Act would adopt the CPI-E, which should give seniors a bigger COLA. Retirees would also benefit from its across-the-board benefits boost of about $2,400 per year. Under this bill, Social Security benefits for someone turning 62 next year would be $200 per month higher.
You can show your support for this landmark piece of legislation by joining The Seniors Trust in calling on Congress to enact this bill and signing our petition.
