Proposed Change in Social Security Could Mean More Money for Retirees
A proposed bill could change how the Social Security COLA is calculated, resulting in higher benefits for retirees.
A new bill could result in an important change in Social Security cost of living adjustments (COLAs) that could benefit retirees. The Boosting Benefits and COLAs for Seniors Act, proposed by Rep. Ruben Gallego (D-Ariz.) and Sen. Bob Casey (D-Pa.), aims to “protect and expand benefits for older adults who rely on them” by making significant changes to the COLA calculation.
The bill claims that many older adults struggle to afford necessities, like food, medication and clothing, because current Social Security benefits have not kept up with rising costs.
“Rising costs mean Arizona seniors on Social Security see the real value of their benefits decrease,” Gallego said in a statement. "My new bill puts more dollars in the pockets of Social Security recipients to pay their bills, get their medications and pay for housing.”
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Change in Social Security COLAs
The COLA is currently based on the Consumer Price Index for Urban Wage Earners (CPI-W), which reflects everyday spending an individual would face, including expenses for food, housing, transportation, consumer goods, etc.
Under the new bill, however, the COLA would be based on the Consumer Price Index for Americans aged 62 or older (CPI-E), as this price index reflects the costs incurred by older adults more accurately. Medical expenses, an increasing burden on older adults, are weighted more heavily in the CPI-E than in the CPI-W.
Keeping up with rising healthcare costs
According to data from the U.S. Department of Health and Human Services, out-of-pocket healthcare expenditures for individuals age 65 and older rose 41% from 2009 to 2019, going from $4,846 to $6,833. Older individuals paid significantly more than the total population, which spent an average of $5,193 in out-of-pocket costs in 2019. Overall, older Americans spent 13.6% of their total expenditures on health, compared to just 8.2% among all consumers.
“The current COLA formula doesn’t accurately account for the inflation seniors face, especially in health care,” Roman Ulman, president of AFSCME Arizona Retirees Chapter 97, said in a statement. “It’s important that the COLA reflects how inflation impacts seniors so that we can pay our bills and our monthly Social Security checks stay strong.”
Along with directing the Social Security Administration (SSA) to adjust benefits based on CPI-E rather than CPI-W (if CPI-E would result in a larger increase in benefits), the Boosting Benefits and COLAs for Seniors Act would also direct the Bureau of Labor Statistics to calculate and publish the CPI-E every month.
According to Newsweek, the proposed legislation, if passed, "would apply to determinations made with respect to cost-of-living computation quarters ending on or after September 30, 2024." However, some experts, including Richard Johnson, senior fellow and director of the program on retirement policy at the Urban Institute, don't see the bill going far in Congress.
“This has been talked about for at least a decade," Johnson tells MarketWatch. "If it were part of a broader package of Social Security reforms, maybe." He claims these changes would cost more and add budgetary stress to the Social Security system.
Related Content
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.
-
10 Things You Should Know About Estate Planning for Singles
A guide to how to navigate estate planning as a single person.
By David Rodeck Published
-
Future U.S. Economic Growth Hinges on Immigrants
The Kiplinger Letter With the native birthrate slipping, employers are increasingly relying on foreign-born workers to staff up.
By David Payne Published
-
10 Things You Should Know About Estate Planning for Singles
A guide to how to navigate estate planning as a single person.
By David Rodeck Published
-
Best Cities to Start a Career 2024 — and the Worst
The best cities for starting a career also provide substantial income growth potential and pleasant work conditions.
By Donna LeValley Published
-
Free Things to Do in New York City
Seven free things to do in New York City, so you can better enjoy the most expensive city in the country.
By Donna LeValley Published
-
25+ Early Memorial Day Deals and Discounts
Before the Memorial Day weekend even begins, find early deals and discounts on dozens of items from Amazon, Costco, Best Buy, Target and more.
By Kathryn Pomroy Published
-
10 Ways to Save Money at Starbucks
Use these 10 hacks to save money at Starbucks without sacrificing great taste or breaking the bank
By Kathryn Pomroy Published
-
Nearly 50% of Workers Are Thinking of Quitting Their Jobs, Study Shows. Are You?
Nearly half of all workers are thinking about quitting their jobs in 2024, according to new research from Microsoft and LinkedIn. Here's why.
By Kathryn Pomroy Published
-
April CPI Report Offers Some Relief: What the Experts Are Saying About Inflation
CPI CPI moderated last month, boosting hopes for interest rate cuts coming sooner rather than later.
By Dan Burrows Published
-
Get Starbucks' New Summer App-y Days Specials for May
Starbucks is offering exclusive in-app offers every Monday and Friday in May.
By Donna LeValley Published