Social Security COLA Increase Doesn’t Alleviate Retirees’ Fears
Retirees are receiving an extra $56 per month in Social Security benefits this year. While that is certainly good news, Investopedia found that many retired workers fear that their actual costs are rising faster than the cost-of-living adjustment (COLA). They are not alone.
Citing a report from the Transamerica Center for Retirement Studies, analysts found that 39 percent of middle-class Americans in their 50s and 60s say “Social Security being reduced or ceasing to exist” is one of their greatest retirement fears. Similarly, four out of ten people surveyed say they fear outliving their savings and investments.
One of the biggest anxieties is the impact of inflation. As the cost of goods continues to climb, retirees are losing buying power. The Social Security COLA is supposed to help benefits keep up with inflation, but because of the way they are calculated, that doesn’t happen.
COLA Formula is Faulty
The formula used to calculate the annual COLA measures how much more goods and services cost from one year to the next. Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to make this calculation.
The problem is that wage earners have different spending habits than retirees. The CPI-W underestimates the amount seniors spend in categories where inflation tends to be very high, such as healthcare.
A Better COLA Calculator
Instead, senior advocates, including The Seniors Trust, believe the Consumer Price Index for the Elderly (CPI-E) should be used to calculate the COLA. This index shows how inflation actually impacts the typical retiree based on seniors’ spending habits.
We are calling on Congress to enact the Social Security Expansion Act. It calls for adopting the CPI-E as the COLA calculator, better ensuring that Social Security benefits keep pace with inflation.
Additionally, this landmark piece of legislation would also extend the solvency of the Social Security trust fund through 2096, expand Social Security benefits by about $200 a month for current and new beneficiaries, require millionaires and billionaires to pay their fair share into Social Security by lifting the wage cap, and improve the Special Minimum Benefit for Social Security recipients which would help low-income workers stay out of poverty.
Is this something you can get on board with? Join us in urging lawmakers to enact the Social Security Expansion Act. You can show your support by signing our petition.
