Eight in 10 retirees think Congress should beef up inflation protection by providing a Social Security COLA that more closely reflects inflation experienced by older adults, according to a new survey by The Senior Citizens League.
The 3.2% Social Security cost of living adjustment (COLA) announced by the Social Security Administration last Thursday is well above the 2.6% average over the past two decades, but according to the new survey, a strong majority think using a “senior” consumer price index instead of the one currently used to calculate the next year’s COLA is a good idea.
“If that were the law today, the COLA in 2024 would be almost a percentage point higher—4%, versus the 3.2% just announced by the Social Security Administration”
TSCL’s Mary Johnson
“If that were the law today, the COLA in 2024 would be almost a percentage point higher—4%, versus the 3.2% just announced by the Social Security Administration,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League. Johnson bases that estimate on the rate of increase in the Consumer Price Index for the Elderly (CPI-E); the most recent data was released Oct. 12.
Since 1975, the Social Security COLA has been calculated annually using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Still, oddly enough, Johnson noted, that index does not survey the costs of retired households over the age of 62. Today, there are other consumer price indexes to choose from that better reflect inflation experienced by older Americans. Launched in 1983, the CPI-E surveys the cost changes of households aged 62 and older.
Failing to adequately protect Social Security benefits from the effects of inflation can lead to a loss of buying power in benefits over time and lower growth in Social Security benefit income throughout retirement. Older and disabled Social Security recipients spend their money differently than younger working adults. Retirees tend to spend a bigger share of their incomes on housing and medical costs—two spending categories that tend to rise more quickly than overall inflation.
Meanwhile, younger working adults tend to spend more on commuting costs and energy while spending considerably less on healthcare than older adults. According to annual research by TSCL, Social Security benefits have lost about 36% of buying power since 2000.
The CPI-E tends to rise more quickly than the CPI-W in most years, but there are notable exceptions, such as in 2021 and 2022, when gasoline prices soared. The Social Security 2100 Act, legislation introduced in the House by Representative John Larson (D-CT), would change how the COLA is determined by requiring the higher of the CPI-W or the CPI-E to be used in calculating the COLA.
A new analysis by TSCL’s Johnson comparing the two indexes with the proposal to use the higher of the two indicates that using this approach would provide greater inflation protection and higher benefit growth over time. When COLA increases under current law are compared with COLAs calculated using the higher of the CPI-W or the CPI-E over the past 10 years, the analysis found that an average Social Security benefit of $1,294 in 2014 would grow to $1,692.20 in 2024 using the CPI-W. Using the higher of the two benefits, the $1,294 benefit in 2014 would be significantly higher—$1,749.8 in 2024 or $57.60 more per month more, than under current law.
In addition, the analysis found this calculation method would have provided an additional $3,787.80 more in Social Security income from 2014 through the end of 2024.
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