Higher COLAs Possible

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Higher COLAs Possible

Social Security recipients would receive higher Cost-of-Living-Adjustments (COLAs) under legislation recently introduced in the House by Representative Bernie Sanders (I-VT). "The Consumer Price Index for the Elderly Consumers Act," H.R. 2035, would provide a more fair COLA by using the Consumer Price Index for Elderly (CPI-E) to determine the annual increase. The bill is especially timely because co-chairmen of the Bush Social Security Commission recently announced that they may recommend future COLA cuts in order to pay for private retirement accounts.

Currently Social Security recipients receive a COLA that is tied to a CPI that surveys the change in prices of goods and services used by younger working Americans, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It tends to understate the inflation that seniors face and leads to COLAs that are too low. Younger workers do not spend as much on health insurance nor do they use as many prescription drugs as seniors.

The CPI-E, gives greater weight to such items as prescription drugs and health care costs. An on-going study done for TREA Senior Citizens League finds that a person who retired with average benefits in 1984 would have received about $5,654 more using the CPI-E.Watch your mail for updates from TSCL on this bill.

For a related story click here"Senior CPI Would Mean Higher Social Security COLAs".

August 2001

This article first appeared in Volume 6, Issue 9 of `The Social Security and Medicare Advisor` newsletter (September). To receive future editions of `The Advisor` in its special, free e-mail version, please click here.