Renewed Calls for a New Social Security COLA Calculator
Social Security has a built-in system to protect recipients’ benefits from inflation. If not, their buying power would erode year after year. The annual cost-of-living adjustment (COLA) is supposed to ensure that Social Security benefits increase each year to help keep up with inflation.
But, according to an article by Yahoo! Finance, that doesn’t always happen. That’s because the Social Security COLA is calculated using an inflation metric called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The article explains that this metric attempts to measure the price increases experienced by blue-collar workers who live in areas with large populations.
Therein lies the problem. Blue-collar workers have far different spending habits than seniors relying on Social Security retirement benefits. For example, the article states that “the CPI-W assumes workers spend around 7 percent of their income on healthcare, but seniors can spend 16 percent or more of their income on healthcare.” This does a huge disservice to older Americans.
New COLA Calculator
Senior advocates such as The Seniors Trust believe the Consumer Price Index for Americans 62 years of age and older (CPI-E) would be a better formula, as it more accurately reflects the costs incurred by older adults, especially related to healthcare and housing.
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 an across-the-board benefits boost of about $2,400 per year and long-term Social Security solvency.
