The Senior Citizens League (TSCL) has given a strong advisory about upcoming changes in the cost-of-living adjustment, commonly referred to as COLA. They argue that things are set to get worse for seniors.
According to TSCL, if you were one of the many who retired in 1999, you’ve potentially missed out on nearly $5,000 in Social Security payments due to the government’s use of the CPI-W. That’s a price index that tracks inflation mainly for those living in the cities.
TSCL is urging lawmakers to modify their approach and utilize the CPI-E, which better represents inflation for seniors. It’s pointing out that this method usually results in a slightly higher rate than the CPI-W, averaging about 0.1 percentage points more.
Why Is This Important?
Approximately 70 million Americans depend on monthly Social Security payments. While the annual COLA announcement typically arrives on October 15, this year, we’re facing a government shutdown that’s pushed it back to October 24.
Key Takeaways
The way the Social Security COLA is calculated, moving from the CPI-W, which focuses on urban residents, to the CPI-E would reflect the financial hardships that many seniors face better. It’s been a subject of serious debate because costs that seniors encounter, like housing and healthcare, are increasing at a faster clip.
TSCL Executive Director Shannon Benton remarked, “Keeping the CPI-W as the standard while the CPI-E is available shows Congress’s reluctance to make moves that would assist seniors. Switching to CPI-E wouldn’t be a monumental task since it’s already established and more beneficial for older Americans.”
Over the last 25 years, the CPI-E has outperformed the CPI-W 69% of the time. If things don’t change, those who retired in 1999 could lose around $5,000 in benefits, while those planning to retire in 2024 risk facing losses over $12,000.
Moreover, tariffs implemented during the Trump administration are driving inflation higher. This situation might create a more considerable COLA for 2026, with increases expected between 2.7% and 2.9%
But here’s the catch: the increased benefits might still not cover the rising costs senior citizens face, particularly if they struggle to keep up with medical costs. The highest COLA hit 8.7% in 2023, yet inflation continues to erode purchasing power for many seniors.
Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, pointed out, “If the COLA doesn’t align with actual expenses, retirees stand to lose a significant sum over the years. This money should go toward covering growing essential costs.”
Despite bipartisan support for changes, movements towards switching the COLA calculation to CPI-E face multiple roadblocks in Congress.
Research from TSCL found that 93% of seniors rank Social Security reform as a priority for both President Trump and congress members.
Ongoing adjustments in COLA may affect the job market, too.
Rachel Shaw, an HR executive from Rachel Shaw Inc., hinted that delaying decisions regarding COLA could compel seniors who are eligible to retire to hang onto their jobs longer or even return to work after retirement.
“An aging workforce presents particular challenges for companies, as the potential savings for the government might translate into higher claims for workers’ compensation or private disability insurance,” she noted. “Furthermore, this could limit job availability for younger generations, with older individuals occupying part-time positions typically suited for younger workers.”
Voices from the Community
Shannon Benton, TSCL Executive Director: “If Congress keeps opting out of transitioning to CPI-E, the challenges will only spiral. Current retirees will see their Social Security fall further behind inflation, and newcomers will start off with even lower benefits.”
Kevin Thompson, CEO of 9i Capital Group: “Using CPI-E would give a slight retirement uplift, likely thousands more throughout one’s life. It makes sense because healthcare and housing costs are vital to seniors’ budgets, yet they often take a backseat in calculations.”
Alex Beene, an instructor from the University of Tennessee: “The debate over COLA calculation methods is ongoing. Currently, the method may be skewed towards those living in cities, which overlooks the more coherent effects older individuals experience with inflation. Switching to CPI-E would, theoretically, result in increased payments that could help bridge the gap, yet significant changes aren’t on the horizon.”
What’s Coming Up?
Although there has been a push to get from CPI-W to CPI-E in Congress, major progress is lacking.
Thompson highlighted, “The issue of Social Security reform extends well beyond adjusting checks. A lot relies on sustainable funding to prevent benefit cuts, especially for those who already struggle.”
Unfortunately, legislative changes for COLA adjustments seem far off. It seems that leaders are handled with an urging need for comprehensive reform—one cannot simply shoot up payouts without addressing the financing behind it.
