Updated

Updated · USA TODAY · Jul 5

Social Security COLA Uses 3rd-Quarter CPI-W, Leaving Retirees With 20% Buying-Power Loss Since 2010

Updated

Updated · USA TODAY · Jul 5

Social Security COLA Uses 3rd-Quarter CPI-W, Leaving Retirees With 20% Buying-Power Loss Since 2010

Q: With a higher 2027 COLA predicted, how much will rising Medicare premiums consume before it reaches retirees?

A higher 2027 COLA is likely to be trimmed only modestly by Medicare Part B premiums before retirees see it. Based on the figures provided, the projected standard Part B premium for 2027 is $209.50, up $6.60 a month from $202.90, so about $6.60 of the COLA would be absorbed before the net Social Security payment reaches most beneficiaries. Using the current COLA forecasts, that still leaves most of the increase intact on paper. The Senior Citizens League’s 3.8% estimate would add about $77 a month to the average retiree benefit, leaving roughly $70.40 after the projected Part B increase. Under a 3.9% estimate, an $81.17 increase would leave about $74.57. If the COLA ends up closer to analyst Mary Johnson’s 4.7% forecast, the dollar gain would be larger, though no specific average-net figure was provided in the source material. The bigger issue is that even a relatively small Medicare deduction does not capture the full squeeze on retirees. Social Security COLAs are based on CPI-W inflation, which often understates seniors’ costs, especially for healthcare, housing, utilities and food. That is why advocates argue that even when the headline COLA rises, much of the practical benefit can still be eroded by essential expenses. A safeguard remains in place: the “hold harmless” rule generally prevents a retiree’s net Social Security check from falling solely because of a Part B premium increase.

Q: With seniors’ buying power eroding, what prevents adopting a more accurate inflation index for Social Security benefits?

What prevents a switch is not a lack of alternatives, but law, cost, and the broader financing problem facing Social Security. By statute, Social Security COLAs are tied to the CPI-W, an index based on urban wage earners and clerical workers, not retirees. Moving to a senior-focused measure such as the CPI-E would require Congress to change the law. The Social Security Administration cannot do it on its own. The main obstacle is financial. A more senior-relevant index like CPI-E generally rises faster than CPI-W because older households spend more on healthcare, housing, and utilities. That would mean larger annual COLAs and higher lifetime benefits. But Social Security is already under long-term strain, with its trust funds projected to face depletion in the next decade absent reform. Any change that raises payouts adds pressure unless paired with new revenue or other program changes. There is also a technical issue. CPI-E exists, but it has long been treated as an experimental index rather than the standard benchmark used for benefit law. That makes policymakers more cautious about adopting it as the official COLA measure. So the barrier is not whether seniors’ costs differ—they do. It is that a more accurate index would likely increase benefits at a time when the program’s finances are already fragile, and changing the formula requires legislation that lawmakers have not enacted.

3 articles · Updated · USA TODAY · Jul 5

Third-quarter CPI-W data determines Social Security’s annual COLA, with the adjustment typically announced in October based on July-through-September inflation.
That timing can leave retirees exposed if prices jump after September, because benefits rise only by the measured third-quarter increase and are not recalculated for late-year inflation.
CPI-W also may understate seniors’ real costs, especially healthcare, and the Senior Citizens League estimates retirees lost about 20% of buying power between 2010 and 2024.
Zero COLAs remain possible when inflation is flat or negative, though benefits cannot be cut; retirees saw no adjustment in 2010, 2011 and 2016.