Social Security recipients are finally getting a cost-of-living adjustment (COLA) this year that became effective January 1st. But if you’re like Millicent G., a 72-year-old retired veterinary technician from Williamsburg, Virginia, the 0.3% COLA increase is a far cry from what you think it should be. “The cost-of-living adjustment is completely ignoring seniors,” she says.
In 2016, Millicent’s Medicare supplement and dental premiums combined increased a total of 34%. Like nearly half of all respondents to TSCL’s 2016 Senior Survey, medical costs are taking about one-third of her Social Security benefit, leaving little left over for housing, groceries, and everything else. “I just lose and lose and lose,” she says.
Millicent is right. COLA adjustments are ignoring seniors. “One would think that a cost-of-living adjustment for retired and disabled Americans would be based on the increase in cost of goods and services most used by the retired and disabled,” Advisor editor Mary Johnson recently said in an interview with Fox Business News. “But that’s not how it works.”
The COLA is based on the spending patterns of younger working Americans, using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That index doesn’t include the “market basket” of anyone age 62 or over. Younger workers have very different spending patterns than retirees and the disabled, who must spend more of their budgets on healthcare and housing, two categories which increased several times faster than overall inflation over the past twelve months. Younger workers spend a greater portion of their income on gasoline, one spending category that has gone down dramatically.
Since 1983 the government has tracked the spending patterns of people age 62 and older under an experimental senior CPI, the Consumer Price Index for Elderly Consumers (CPI-E). That index gives greater weight to healthcare costs and housing. The Senior Citizens League (TSCL) believes that the CPI-E would be a better choice for the COLA. In fact, if the CPI-E had been used to calculate the COLA for 2017, Social Security recipients would have received a COLA of 2.1% instead of 0.3%. TSCL is working for legislation that would provide a more fair and adequate COLA by using the CPI-E to calculate the annual boost.
How has inflation affected you over the past year? Please help by participating in TSCL’s 2017 Senior Survey.