Senior advocates and some politicians talk about the need to change the measure used to calculate the Social Security COLA from the CPI-W to CPI -E.
They talk about the CPI-E better reflecting senior spending and providing a higher Social Security benefit. This talk may be creating unrealistic expectations.
The COLA in 2020 was 1.6%. Had the CPI-E been used, it would have been 1.9% In a few years, the CPI-E would have been lower. “Since the start of CPI-E in 1983, the average difference between it and the CPI-W is roughly .25 percentage point per year.”
But here’s the thing, Social Security COLAs were never intended to cover rising senior expenses. In fact! Social Security was never intended to be the sole retirement income.
Let’s not forget, there are many American families who have been living on fixed incomes for several years.
Social Security Increase Will Not Adequately Cover Rising Senior Expenses. Social Security benefit increases are based on an inflation calculation called the Consumer Price Index for Urban Wage Earners and Clerical Workers that measures the wages of clerical and wage workers in cities.
This way of measuring inflation doesn’t take into account costs specific to seniors, and if Social Security does not keep pace with the actual rise in prices, then beneficiaries can afford less.
A 2018 report from the Senior Citizens League found that the purchasing price of Social Security benefits has declined by a whopping 34% over the last 18 years. In addition, “since 2000, COLAs increased benefits a total of just 46 percent, while typical senior expenses have jumped 96.3 percent.” Mary Johnson, Social Security policy analyst for The Senior Citizens League, told CNBC that “The flat COLAs make it more difficult for retirees to be able to afford to pay for Medicare Part B premiums, which are going up about three times faster than the annual benefit increases.”
To rectify this oversight, the Senior Citizens League advocates a different inflation measure for seniors, the CPI-E (CPI for the elderly) that would account for rising costs specific to seniors like prescription drug costs, food and senior housing.
Source: Social Security and Medicare: Changes Coming for 2021
Since the start of CPI-E in 1983, the average difference between it and the CPI-W is roughly .25 percentage point per year. Sounds tiny but, like interest, it compounds over time. Had the CPI-E been used to determine COLAs since 2015, your benefit would be about 2% higher today. An average benefit of $1,215 per month in 2015 will increase to $1,298 per month in 2020. But had the CPI-E been used to calculate the COLAs, that benefit would have been $26 per month more or $1,324 in 2020.
Source: https://seniorsleague.org/the-cpi-e-would-pay-a-1-9-cola-versus-the-1-6-you-are-actually-getting/
QUINNSCOMMENTARY 
Back in 1984, the new income tax on Social Security benefits was meant to only affect the wealthy. But the income where SS is taxed was never indexed for inflation so now even people with modest incomes must pay income tax on their SS.
Btw… Rep John Larson, the same House lawmaker who wants to raise the 2021 SS COLA to three percent, also has a bill to raise the income [to compensate for decades of inflation] before SS is taxed. That bill has been stuck in committee because it would not pass the “let them eat cake” GOP Senate.
LikeLike
If the government can print money without any questions as to where it is going, why is Social Security being left out of the projection of needs for keeping up with the times. Banks, airlines, businesses are being allotted $;s to keep them afloat, why isn’t Social Security put into those in need of help as well with the projection of 2034 with no dollars remaining for SS recipients?My retirement was almost 20 years ago, pensions then did not take into account the tremendous inflation that would occur since then with house prices being the price of a new car now and the costs of having to hire people for services we no longer can do ourselves. None of these are taken into consideration with the pay structure being much less than today consequently the need to depend on Social Security with the rising costs since retirement – what worked fine back then of being able to keep up with costs. with out retirements and Social Security doesn’t work in today’s economy. No one in our times saw 6 digit salaries, even managers or CEO’s and retirements were based on the amount one made throughout the years, along with the Social Security allotted amount. I believe that is why so many are dependent on Social Security..
LikeLike
Too many seniors are worried about a COLA to which they believe that they are entitled to and are depended on. If $26 a month is going to break you, then you had a very bad retirement plan. I didn’t base my retirement on money or income that I didn’t already have.
What they really should be worried about is not whether its a 1.0% COLA or a 1.9% COLA but the reduction of your benefits when social security trust fund is depleted sometime before 2034 or as soon as 2023 per the SSA. The SSA has been putting this warning on your social security statements (for those of us still not collecting) that they may be only able to pay between 78 to 80% of the promise benefits between 2033 to 2034 (all pre-covid).
Instead of whining about the COLA you should be yelling at Congress to fix the funding problem instead of promising more benefits with money that won’t be there in a decade. You are worry about not get 1.6% when you should be worried about being cut 20%.
LikeLiked by 1 person
Excellent point
LikeLike