Social Security's COLA Tracks Working Households, Not Retirees. Here's How Much Bigger 2024's Raise Would Have Been.
Key PointsSocial Security beneficiaries will see a 3.6% increase in their current payments beginning in January 2027.
Social Security recipients will receive a 3.6% raise in January due to inflation, but this adjustment may not fully cover their expenses. This is because Social Security's cost-of-living adjustment (COLA) is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which primarily measures the living costs of working households.
In contrast, the Consumer Price Index for the Elderly (CPI-E) specifically tracks the cost of living for Americans aged 62 and older. If Social Security's COLA were based on the CPI-E, retirees would have received a 4% increase instead of the 3.6% adjustment they are receiving. Over time, the use of inflation measures that do not accurately represent retirees' expenses has resulted in a cumulative loss of 13.7% of their buying power since 2016, according to advocacy group The Senior Citizens League.
While there are proposed solutions that require congressional action, retirees can currently increase the value of their payments by generating more investment income or using higher-yielding savings accounts for idle cash.
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