There is a new push on Capitol Hill to link Cost of Living adjustments (COLAs) for federal retirement programs to a much more powerful indicator of the prices seniors really pay for crucial goods and services. It’s called the Consumer Price Index for the Elderly (CPI-E), an experimental metric by the Bureau of Labor Statistics that more accurately reflects senior’s costs than the traditional Consumer Price Index (CPI), or even the Consumer Price Index for Wage Earners (CPI-W), which the government currently uses to calculate COLAs for Social Security. Switching over to the CPI-E could mean a substantial increase in benefits for retirees.
Congressman John Garamendi (D-CA) is reviving a 2015 House bill to mandate that the CPI-E be used to calculate cost of living adjustments for federal retirement programs. The National Committee has endorsed Garamendi's legislation.
"The consumption patterns of seniors are different from those of younger people. Using the CPI-E will ensure that benefits for retirees are not diluted by disproportionately rising costs in sectors affecting seniors. The CPI-E is the most accurate and balanced measure of the real costs that seniors face in retirement." – Rep. John Garamendi (D-CA)
Like the standard CPI, the new index calculates the prices of a typical basket of goods and serves that are affected by inflation. The difference is that the CPI-E looks at a basket that reflects the kinds of items seniors spend money on. For instance, housing and medical costs make up a much bigger chunk of seniors’ expenses (58%) in the CPI-E than in the traditional CPI. On the other hand, food and transportation costs are de-emphasized in the CPI-E, since seniors typically spend less of their money on those items than the general population does.
If Congressman Garamendi’s bill were to become law, the CPI-E could mean serious new money in retirees’ pockets. Research compiled from Bureau of Labor Statistics data (based on the current CPI-E model) reveals:
- If the CPI-E had been in effect for the past 30 years, retirees would have received 22% more in cost-of-living increases.
- If you as an average worker retired in 2015 with the current CPI-E in place, you would receive nearly $30,000 in additional benefits for the rest of your lifetime.
With 1 out of 3 seniors relying on Social Security for all or most of their income, those increases could make a huge difference. At a time when Congressional Republicans (most notably Rep. Sam Johnson of Texas) are planning to cut COLAs, the Garamendi bill plants a flag on a crucial issue that could mean the difference between financial stability and poverty for millions of seniors.
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