Why This Year’s Social Security Benefit Boost Could Cost Some Seniors Big Bucks
Social Security recipients saw the biggest benefits boost in 40 years in 2023, but many say it’s still not enough. Even worse, it may actually end up costing some seniors more money.
A report by Yahoo! Finance found that over half of all older Americans surveyed said the 8.7 percent cost-of-living adjustment (COLA) can’t keep up with inflation. Although the average $140 per month increase was meant to help offset higher costs, many seniors relying on Social Security income say they are still struggling to make ends meet.
Making matters worse, the bigger benefits could result in a bigger tax bill for some seniors. The increased Social Security benefit payments has pushed some retirees over income thresholds. This means they might be forced to pay taxes they hadn’t in the past.
COLA Calculator
Seniors are struggling to keep up with inflation, but they tend to be impacted by different expenses than people who are still working. Older Americans tend to spend more on health care and housing than on food, beverages and transportation.
Currently, Social Security uses the consumer price index for Urban Wage Earners and Clerical Workers, or CPI-W, to calculate its COLA. This reflects price changes for a group of goods and services bought by working people, not retirees. Many senior advocates have argued that other measurements would better reflect the costs retirees face, such as the Consumer Price Index for the Elderly, or CPI-E, stating that would be a better gauge for the annual cost-of-living adjustment.
Our Solution
The Seniors Trust agrees! We think the CPI-E should be used instead of the CPI-W because it is a better gauge of the actual inflation experienced by seniors. We believe switching to using the CPI-E would provide a much fairer cost-of-living adjustment for retirees. It would help ensure benefit increases would cover the actual expense increases seniors are experiencing.
Changing the COLA calculator is just one of the main tenets of the Social Security Expansion Act. This landmark piece of legislation would also provide retirees with an immediate Social Security benefits boost. It calls for increasing monthly benefits by about $200 on average, which would help put more money in the pockets of deserving retirees.
