Belle is a 90-year old resident of Cuyahoga County who, like so many other seniors, has lived a longer and healthier life because of Medicare and Social Security. But Belle’s income and Social Security benefits barely cover the costs of hearing aids, eye glasses, prescription medications, and rising energy and housing expenses. Simply put, Belle’s Social Security check, like that of other seniors, has lost its value over the years.
That’s because while seniors’ energy, food, and prescription drug costs have increased over the past three years, they’ve only received a Cost of Living Adjustment (COLA) for Social Security this past year. That’s because of an outdated and flawed formula for calculating COLAs that does not accurately reflect the real costs facing our nation’s seniors.
Last month, the Social Security Administration announced that seniors would get their first COLA increase in more than two years. But while seniors will finally receive a COLA in 2012, the increase is less than it should be to meet current expenses. Right now, COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the groups included in the CPI-W only represent about 32 percent of the U.S. population. It measures the costs of younger, employed individuals – and does not reflect seniors’ expenses, forcing them to pay rising bills with inadequate COLAs.
That’s why I recently introduced the Consumer Price Index for Elderly Consumers Act. The Act would formalize an already existing Consumer Price Index for the Elderly (CPI-E) to calculate COLAs for people who are more than 62 years of age, which would more accurately reflect the needs of today’s seniors. The CPI-E would take into account seniors’ specific consumption habits and costs of living – adjusting for health care, energy, and food costs for seniors – and then be used to determine COLAs for Social Security benefits.
The average person who retired in 1985 received a monthly benefit of approximately $887.27 under the CPI-W in 2009. Under the CPI-E, that senior would have received $954.52 – a difference of $66.25 a month or $795 over the course of a year.
Too many seniors who have worked hard and played by the rules depend on Social Security to help pay for necessities. For others, Social Security has become their sole, or majority, source of retirement income – the result of a financial crisis that wiped out retirees’ pensions, IRAs, and 401Ks.
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