"The mismatch stems from the way COLAs are calculated. Currently, the SSA bases annual increases on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure designed around the spending habits of younger, urban workers. An alternative measure, the Consumer Price Index for the Elderly (CPI-E) weights housing, health care and utilities more heavily and would have produced a 3.1% increase in 2026 instead of 2.8%, according to Investopedia."
"COLAs based on the CPI-W have lagged behind the CPI-E in each of the past three years and in 18 of the past 26 years, by an average of 0.2% annually. This has meant that retirees' annual raises haven't always kept pace with the inflation of their most common expenses. Even with a switch to the CPI-E formula, rising Medicare costs could offset some gains."
"The Senior Citizens League (TSCL) reports that retirees who started benefits in 1999 have lost nearly $5,000 in lifetime payments compared with what they would have received under CPI-E. For those retiring in 2024, the shortfall could exceed $12,000 over a 25-year retirement. TSCL also estimates that Social Security benefits have lost roughly 20% of their value since 2010. To fully restore their purchasing power, retirees would need an additional $370 per month, or $4,440 annually."
COLAs use the CPI-W, a measure reflecting younger urban workers' spending, which underweights housing, health care and utilities important for retirees. CPI-E would have yielded a 3.1% 2026 increase versus 2.8% under CPI-W; CPI-W lagged CPI-E in each of the past three years and in 18 of 26 years by about 0.2% annually. Rising Medicare Part B premiums — from $185 to $202.90 in 2026 — erode COLA gains. TSCL estimates retirees who began benefits in 1999 lost nearly $5,000 lifetime; 2024 retirees could face $12,000 shortfalls over 25 years, and benefits have lost roughly 20% value since 2010. Legislative bills propose COLA formula changes.
Read at www.housingwire.com
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