The Time Has Come to Fix the Social Security COLA Calculator
To help retirees keep up with rising costs, Social Security offers an annual cost-of-living adjustment (COLA). But even with that, seniors are struggling financially. Now we may know why.
A recent article by AOL explains that there is a serious flaw in the formula used to calculate the annual COLA, and it’s costing America’s retirees thousands of dollars over the course of their lifetimes.
The Social Security COLA is supposed to maintain the buying power of retirees’ benefits, even as costs continue to rise. The problem is that benefits are not keeping up with inflation. According to the article, that’s because of the way COLA is calculated.
COLA Formula Is Faulty
The purpose of the COLA is to fight inflation, so 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 article explains that 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.
Changing the COLA calculator would make a big difference. The article states that “the average senior who retired in 1999 has lost close to $5,000 in benefits because the wrong price index is used to calculate Social Security COLAs.”
It’s not too late to make a change. 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.
