In recent years, concerns have risen among experts about Social Security benefits not keeping pace with inflation, adversely affecting retirees who heavily rely on it as their primary income source. The proposed changes to Social Security are now under consideration by lawmakers in Washington to address this pressing issue.
Proposed Changes to Social Security COLA: How Washington’s New Formulas Could Boost Your Retirement Income
Revamping Social Security: Advocates Push for CPI-E to Boost Retiree Benefits
The current revisions to the Cost-of-Living Adjustment (COLA) are based on the Urban Wage Earners and Clerical Workers Consumer Price Index (CPI-W). Some who disagree claim that this index, which represents the spending habits of employed individuals, might not fairly reflect the costs borne by retirees. Some legislators support the introduction of the Consumer Price Index for the Elderly (CPI-E), which considers the spending patterns of people 62 and older, in order to rectify this discrepancy.
Experts who highlight that more than 85% of Social Security recipients are in this age range support this move to use the CPI-E. The CPI-E gives less weight to categories that are less important to retirees, such transportation, tuition, and food and drink, and more weight to spending categories that are essential for elders, including housing and healthcare. An additional $2,689 in benefits could have been obtained by the average retired worker if these suggested improvements to Social Security had been put into effect over the previous ten years.
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Social Security 2100 Act: A Bold Proposal to Boost Retiree Benefits Faces Financial Hurdles
A more aggressive proposal involves calculating COLAs using the higher of the CPI-W or CPI-E each year, as outlined in the Social Security 2100 Act. This approach could potentially increase COLAs by an average of 0.3 percentage points annually. Applying this method over the last decade could have resulted in retirees seeing a 4.4% higher benefit, translating to an extra $3,788 in their pockets.
However, it’s crucial to note that while these proposed changes to Social Security aim to address concerns about benefits falling behind inflation, the actual modification of the COLA formula is unlikely to happen in the immediate future. The Social Security program faces financial challenges, with the Old-Age, Survivors, and Disability Insurance (OASDI) trust fund potentially being depleted within the next decade. Lawmakers will need to navigate these financial hurdles before implementing significant changes to benefit calculations.
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