A Renewed Call for Social Security to Adopt a New COLA Calculator
The Social Security Administration (SSA) has revealed its 2025 Social Security cost-of-living adjustment (COLA) and it’s a very modest 2.5 percent increase. According to an article by The Motley Fool, that’s the smallest COLA increase in four years. Unfortunately, this means retirees will continue to lose buying power in the coming year.
Call for a New COLA Calculator
The problem is with how the Social Security COLA is calculated. The article explains that the COLA is supposed to “protect the purchasing power of benefits by ensuring payments increase at the same pace as inflation.” It uses a subset of the Consumer Price Index known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to measure inflation.
The CPI-W measures inflation based on the spending habits of younger, working-age adults rather than the Consumer Price Index for the Elderly (CPI-E) which takes into account the unique spending habits of those 62 and older. The article points out that “the CPI-W underestimates the importance of housing and medical care, and overestimates the importance of childcare, education, and transportation.”
Keeping Up With Inflation
The CPI-E has historically increased faster than the CPI-W. The Congressional Research Service reports that between January 1985 and January 2024, the CPI-E increased 211 percent while the CPI-W increased 188 percent. This means seniors are losing significant buying power.
Senior advocates such as The Seniors Trust believe it’s in the best interest of retirees for the SSA to adopt the CPI-E, as it more accurately reflects the costs incurred by older adults, especially related to healthcare and housing.
The Best Solution
The Social Security Expansion Act calls for adopting the CPI-E. Not only would this provide Social Security recipients with a fairer COLA, but this landmark piece of legislation also provides across-the-board benefits boost of about $2,400 per year and long-term Social Security solvency.
The Social Security Expansion Act calls for adopting the CPI-E. Not only would this provide Social Security recipients with a fairer COLA, but this landmark piece of legislation also provides across-the-board benefits boost of about $2,400 per year and long-term Social Security solvency.
