Why We Have a Social Security COLA
Social Security recipients saw an 8.7 percent cost-of-living adjustment (COLA) this year. It’s the largest benefits increase in 40 years. Even though COLA was created to help offset inflation, an article by Forbes questions whether this year’s benefits boost will still fall short. It looked into the origins of the COLA.
What is the COLA?
According to the Social Security Administration, “The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation.” As inflation increases, seniors may need more financial assistance to cover the costs of necessities such as groceries and rent. COLA is supposed to provide a financial boost when the costs of living increase.
Congress created the COLA in 1972 to adjust Social Security benefits to keep pace with the amount of money a person might need to maintain basic living expenses in the United States. To determine if there should be a cost-of-living adjustment, the Social Security Administration works with the Department of Labor to analyze the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W determines how much, on average, working people across the country pay per month for expenses such as groceries, transportation, clothing, etc.
Better COLA Calculator
The Seniors Trust believes Social Security should use the Consumer Price Index for the Elderly, or the CPI-E, instead. That index specifically tracks the spending of households with people aged 62 and older. It places greater value on rising costs of expenses unique to seniors such as housing, healthcare and medicine. This would provide a much fairer cost-of-living adjustment for retirees because it would adjust based on the actual prices seniors are paying.
Changing the COLA calculator is just one of the main tenets of the Social Security Expansion Act. This landmark piece of legislation would also benefit retirees by providing 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.
