Why Seniors’ Expenses Should Matter the Most When Calculating the Social Security COLA
In mid-October, we will find out what the Social Security cost-of-living adjustment (COLA) is for next year. Right now, experts predict it will be around 3 percent. That figure is calculated using the Consumer Price Index for Urban Wage Earners (CPI-W). The Social Security Expansion Act calls for adopting 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 the National Committee to Preserve Social Security & Medicare 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.
