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Why CPI-E Is ‘Higher Index for Measuring Inflation’ In Phrases of COLA for Seniors

Share this…FacebookPinterestTwitterLinkedin katleho Seisa / iStock.com The Social Security Administration lately introduced that Social Security and Supplemental Security Earnings advantages…

By Staff , in Social Security , at October 29, 2021



katleho Seisa / iStock.com

The Social Security Administration lately introduced that Social Security and Supplemental Security Earnings advantages for 70 million Individuals will enhance 5.9% in 2022. Changes had been made to assist senior residents address costs which can be 5.4% greater than they had been final yr, as reported by GOBankingRates. The 2022 cost-of-living adjustment, or COLA, additionally represents the most important enhance in 40 years.

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Underneath the Social Security Act, COLA is calculated primarily based on will increase within the Shopper Value Index for City Wage Earners and Clerical Staff. CPI-Ws are calculated month-to-month by the Bureau of Labor Statistics, with advantages going up if there’s a measurable enhance on this worth index yearly.

Nonetheless, some say that there’s a extra correct strategy to calculate Social Security COLAs.

Mary Johnson, Social Security and Medicare coverage analyst for The Senior Residents League, has been doing analysis on the Social Security COLA for greater than 26 years. “The CPI-E tends to be a greater index for measuring inflation skilled by Social Security recipients, the vast majority of whom are retired adults age 62 and up and youthful disabled adults,” she stated.

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The CPI-E, or Shopper Value Index for the Aged, makes use of the identical formulation and costs because the CPI-W; nevertheless, the CPI-E makes use of expenditure weights for households with people age 62 or older.

Johnson defined that the CPI-W doesn’t survey the spending patterns of households which have adults age 62 and up who’re retired. “Youthful working adults have totally different spending patterns than retired and disabled Social Security recipients who spend extra on well being care, and a larger share of their revenue on housing,” she added.

She additionally talked about that whereas the distinction between the 2 indexes is about 0.2 proportion factors (with the CPI-E being barely extra beneficiant), it varies.

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“In years the place there was a giant enhance in petroleum costs, the CPI-W grows sooner than the CPI-E,” Johnson defined. “Had the COLA been calculated utilizing the CPI-E for the 2022 COLA, it might be 4.8%. The CPI-E tends to yield a modestly greater profit over time.”

Extra From GOBankingRates

Final up to date: October 29, 2021

This text initially appeared on GOBankingRates.com: Social Security Evaluation: Why CPI-E Is ‘Higher Index for Measuring Inflation’ In Phrases of COLA for Seniors



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