Lawmakers Want to Boost Social Security Payments by Changing the Way COLA Is Calculated
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American retirees are expecting more than a change in the weather as October approaches, bringing with it the announcement of the highly anticipated cost-of-living-adjustment (or COLA) to Social Security benefits.
The Social Security Administration raises benefits every year to bring them up to speed with inflation. The boost is calculated using the average inflation rate in the third quarter (July, August and September) with an index called the CPI-W — but that could change as progressive legislators push for a switch to an experimental index they argue is more accurate.
The CPI-W tracks monthly changes in goods and services for urban wage earners and clerical workers, representing about 32% of the U.S. population. Using this measure, Social Security recipients saw a historic 8.7% COLA increase for 2023 thanks to surging costs on everyday goods and services recorded by the index. As prices cool, next year’s COLA is expected to be much lower.
In response to the waning purchasing power of Social Security payments, which average around $1,800 a month for retired workers, two bills have been introduced by Democratic lawmakers: the 2023 Fair COLA for Seniors Act and the Social Security Expansion Act. Both include proposals to calculate the COLA using the CPI-E, a different metric that measures price changes specifically based on the spending patterns of Americans 62 years old and over.
According to sponsors of the bills, the CPI-E more closely tracks the expenses of older people by taking expenses like prescription drugs into account.
"Using a COLA that actually reflects how retirees spend their money — especially in health care — is a no-brainer that will increase benefits and make Social Security work better for the people it serves," Rep. John Garamendi, D-Calif., said in a news release earlier this year.
