A Case for Adopting a New Social Security COLA Formula
The Social Security Administration (SSA) is expected to announce its 2023 cost-of-living adjustment (COLA) around mid-October. There is speculation that because of high inflation, next year’s COLA could be the highest it’s been in about 40 years. Experts think it will be around 9%. That’s a sharp increase from the 2022 COLA which was 5.9% — and everyone thought that was a huge jump when it was announced.
COLA History
We didn’t always have annual COLAs. When Social Security was first established, beneficiaries received the same amount every year. According to the Social Security Administration, it was not until the 1950 Amendments that Congress first legislated an increase in benefits. A second increase was legislated in 1952.
From that point on, benefits could only be increased if Congress enacted special legislation for that purpose. However, in 1972, legislation was changed to provide annual cost-of-living allowances based on the annual increase in consumer prices. That took effect in 1975.
COLA Calculator
Currently, the COLA formula is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. The Seniors Trust believes the better option is to 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.
This change would be made if Congress enacts the Social Security Expansion Act. Along with setting a fairer COLA, this landmark piece of legislation will also increase benefits by $200 per month and secure Social Security solvency for another 75 years.
