Social Security COLA Could See an Upgrade: Democrats propose a new measure to strengthen Social Security benefits, which may boost many seniors’ monthly checks.
Our yearly cost-of-living adjustment (COLA) uses the CPI-W for urban wage earners and clerical workers to calculate Social Security benefits. Since housing and health care inflation is higher for Social Security-eligible seniors, this has irritated many.
The Boosting Benefits and COLAs for Seniors Act (S. 3974) would instead modify the COLA for seniors in accordance with the Consumer Price Index for elderly consumers (CPI-E).
Democrat Senator Kirsten Gillibrand of New York, in addition to five other legislators, introduced the bill.
Social Security provides older individuals with a vital lifeline. “It is the primary source of income for many,” Gillibrand stated in her bill announcement.
“However, due to the inability of benefits to keep pace with rising costs, many seniors are unable to afford even the most fundamentals—especially health care.”
The Boosting Benefits and COLAs for Seniors Act will include the high cost of health care in Social Security benefit calculations to prevent recipients from choosing between medication and other basics.
The COLA does not account for much of the health care inflation seniors face, leaving many in financial danger.
“The majority of older adults have already spent a lifetime working, saving and contributing to Social Security,” Gillibrand said. “They are entitled to a comfortable and financially secure retirement.” “Americans cannot be compelled to choose between health care, financial security, and housing.”
Adding the CPI-E to the yearly COLA calculation may reduce payouts, although many believe it better estimates elder inflation.
“The bill attempts to align COLA payment amounts with the inflated costs that many seniors are currently experiencing in virtually every aspect of life,” Newsweek quoted UT Martin financial literacy specialist Alex Beene. “The Consumer Price Index can reveal a broader story about the costs associated with being elderly in America and depict a better picture of just how expensive that age group has become.”
Further research is needed to estimate how seniors’ monthly benefits may be affected, Beene said.
He says “Collecting data would be necessary to see just how much of an improvement it would be over the current system, but it seems like a move in the right direction.”
However, the new COLA process approval raises certain issues. An increase in monthly Social Security benefits could strain an already shaky system. Experts predict Social Security, which pensioners and disabled people depend on, would go bankrupt by 2033 if nothing changes. As baby boomers retire, fewer remain in the workforce.
Financial expert Michael Ryan told Newsweek, “There will inevitably be opposition from those who believe the CPI-W is adequate or who prefer to see COLAs decreased rather than increased.” “Ultimately, it’ll come down to the political dynamics.”
Ryan said if the legislation passes, lawmakers will likely have to study Social Security programs more closely.
“Higher COLAs mean higher program costs,” Ryan said. Policymakers would have to find solutions like raising the payroll tax ceiling or finding new revenue streams. A difficult balance exists.”
Despite this, financial expert and 9i Capital Group founder and CEO Kevin Thompson believes it will pass since the elderly vote more.
Pew Research estimates that 72% of seniors voted in 2020.
“I believe the program will be a net positive for the elderly population so they can receive the higher of the two systems,” said. “Health care has outpaced inflation and certain outside forces such as death or disability can force a survivor or loved one into financial ruin.”
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