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Understanding How the Social Security Calculates Retirement Benefits

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Nowadays, you can hardly watch the news or read a newspaper without hearing about inflation. While it’s a concern for everyone, inflation is particularly hard for retirees living on a fixed income. To help mitigate its effect, Social Security has an annual cost-of-living adjustment (COLA).

Benefits are supposed to be adjusted to keep up with rising costs. However, as an article by The Motley Fool points out, that is not always the case. The problem is how the COLA is calculated.

COLA Calculator

Right now, increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is based on changes in the average prices of household goods such as food, housing, and transportation.

Many, including The Seniors Trust, believe this is the wrong inflation measure to use. We believe the Consumer Price Index for the Elderly (CPI-E) would be a better measure. It puts more weight on categories, such as healthcare and housing, that impact seniors more.  

Landmark Legislation

A group of lawmakers is trying to change how the COLA is calculated to ensure Social Security benefits keep pace with inflation. The Social Security Expansion Act calls for adopting the CPI-E.

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 Congress to enact the Social Security Expansion Act. You can show your support by signing our petition.