Social Security COLA May Get an Upgrade

Kirsten Gillibrand speaks during special event to address sexual violence during Hamas terror attack on October 7 held at UN Headquarters. Gillibrand was one of the senators who introduced a bill to change the COLA for Social Security payments, which could lead to higher monthly checks for seniors.

Democratic lawmakers have proposed a new law that would give Social Security payments a major upgrade, and many seniors could see higher monthly checks as a result.

Social Security benefits are calculated based on an annual cost-of-living adjustment (COLA), which looks at the consumer price for urban wage earners and clerical workers (CPI-W). That has left many seniors who receive Social Security frustrated, as the inflation they face is often more concentrated in housing and health care.

Under the Boosting Benefits and COLAs for Seniors Act (S. 3974), seniors would see the COLA adjusted based on the Consumer Price Index for elderly consumers (CPI-E) instead.

Senator Kirsten Gillibrand, a New York Democrat, proposed the bill along with five other lawmakers.

“Social Security is a lifeline for older adults. For many, it’s their main source of income,” Gillibrand said in her announcement of the bill. “But benefits aren’t keeping pace with rising costs, leaving many older Americans struggling to afford the basics—particularly health care.

“The Boosting Benefits and COLAs for Seniors Act would factor the high cost of health care into Social Security benefit calculations and help make sure recipients aren’t forced to choose between paying for their medication and buying other necessities.”

Currently, the COLA leaves out a big portion of the inflation seniors experience in health care costs, and that leaves many grappling with how to make ends meet.

“The majority of older adults have already spent a lifetime working, saving and contributing to Social Security,” Gillibrand said. “They deserve to retire in comfort and with funding. We can’t force Americans to choose between housing, financial security and health care.”

Many believe the CPI-E would be a better measure of the inflation seniors are facing but are unsure how using it in the calculation of the yearly COLA would impact payment amounts.

“The bill is an attempt to line up COLA payment amounts with the inflated prices many seniors are seeing in virtually every aspect of life right now,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. “The Consumer Price Index can tell a broader story about the costs associated with being elderly in America and paint a better picture of just how expensive it has gotten for that age group.”

Beene said further research would be needed to anticipate how much seniors’ monthly benefits would change as a result.

“It seems like a move in the right direction, but as with anything, data would have to be collected to see just how much of improvement it would be over the current system,” Beene said.

Still, there are some concerns if the new COLA process gets approved. If it raises Social Security monthly payments, it could put a financial strain on a system that’s already in jeopardy. Experts have predicted Social Security, which is relied on by retirees and those with disabilities, will become insolvent by 2033 if nothing changes. That’s because more baby boomers are retiring with fewer left remaining in the workforce.

“There’s bound to be some opposition from those who think the CPI-W is just fine or who want to see COLAs reduced instead of increased,” Michael Ryan, a finance expert who runs michaelryanmoney.com, told Newsweek. “Ultimately, it’ll come down to the political dynamics.”

Ryan said if the bill goes through, lawmakers would likely need to take a deeper look at the policies at the center of Social Security.

“Higher COLAs would mean higher program costs,” Ryan said. “So policymakers would need to find ways to offset that, like raising the payroll tax cap or exploring other revenue sources. It’s a delicate balance.”

Despite this, Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, said he thinks it does have a shot of being passed because the elderly tend to vote in larger numbers.

According to Pew Research, roughly 72 percent of the elderly population voted in 2020.

“I believe the program will be a net positive for the elderly population so they can receive the higher of the two systems,” Thompson said. “Health care has outpaced inflation and certain outside forces such as death or disability can force a survivor or loved one into financial ruin.”

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