Why COLA Needs A New Formulation
Do you remember back in the 80’s when Coca-Cola introduced New Coke? The launch of the reformulated soft drink was intended to re-energize the cola category but it is now widely considered to be one of the biggest marketing blunders in history. It elicited so much furor that the company had to bring back its original formula, now dubbed Coca-Cola Classic, just a few months later – and New Coke no longer exists. Fast forward nearly 40 years and there is a different cola in desperate need of reformulation. It’s not a soft drink but rather Social Security’s annual Cost of Living Adjustment (COLA).
Smart Asset defines a cost-of-living adjustment, or COLA, as a change to a recurring payment (i.e.: retirement benefit or salary) that reflects changes in the costs of goods and services. The Social Security Administration calculates its COLA every fall and determines if benefit amounts need to increase. This year, recipients saw a 1.3% increase, which equates to about $20 more per month in benefits on average. That’s simply not enough!
Why The Social Security COLA Is Unfair
The Social Security Administration calculates its COLA based on the Consumer Price Index For Urban Wage Earners And Clerical Workers (CPI-W). This looks at how the prices of certain goods and services impact households where at least half of the household income is earned by a person working in clerical or wage-paying jobs. It’s time we change that.
Since Social Security benefits are paid to retired workers, the COLA should be calculated based upon their expenses. It’s time the federal government adopt the Consumer Price Index for the Elderly (CPI-E) to calculate Social Security Cost-of-Living Adjustments (COLAs) instead of the Consumer Price Index for Urban Wage Earners (CPI-W) used currently. The CPI-E takes the unique spending habits of seniors into account — particularly regarding the rising cost of healthcare — and offers a more realistic COLA for retirees.
Call For Change
The Seniors Trust is committed to expanding benefits for retirees through passage of the Social Security Expansion Act. In addition to instituting a fair annual COLA, this landmark piece of legislation will increase monthly benefits by about $65 and strengthen the long-term solvency of the Social Security program.
Please consider joining The Seniors Trust in our mission to reform Social Security the right way: by expanding and strengthening benefits proven to reduce senior poverty and improve retirement security. You can contact your Representative and Senator personally and urge them to enact this bill or simply sign our petition to Congress and join our fight to improve the lives of senior citizens.
