Social Security beneficiaries are getting the highest cost-of-living adjustment in decades.
The increase went into effect in January.
The change in prices was announced in October.
The Consumer Price Index, a government measure for price changes for certain goods, increased in December from the previous year at the fastest rate in 33 years.
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Excluding food and energy prices, the index was up 5.5%.
As policymakers and experts debate whether Social Security's annual cost-of-living adjustment, or COLA, accurately reflects price increases seniors face, record-high inflation comes as a result.
The Social Security Administration uses a measurement called the Consumer Price Index for Urban Wage Earners and Clerical Workers to calculate annual adjustments.
The Consumer Price Index for the Elderly, orCPI-E, is an experimental index for people ages 62 and over that is proposed to be changed into a measurement for Social Security.
During his campaign, President Joe Biden advocated for changes to Social Security.
The Bureau of Labor Statistics at Congress instructed them to create the CPI-E in 1987.
Nancy Altman, president of the advocacy group Social Security Works, submitted testimony for a December hearing stating that the switch would not represent a benefit increase.
It ensures that benefits won't erode, but will maintain their purchasing power over time.
The Center for Retirement Research at Boston College says that changing to the CPI-E may not increase the COLAs beneficiaries see.
The Center for Retirement Research found that the increase would have been 4.8% if that measure had been used.
The difference between the two has narrowed.
In the third quarter of 1983 to the third quarter of 2021, the average annual increase to theCPI-E was 2.8%.
If we were to set up a perfect world, it would be worthwhile to have a separateCPI for older people or people who are receiving Social Security benefits.
From 1983 to 2002 the inflation gauge rose more quickly than the inflation gauge. In the past 20 years, the gap fell to 0.05 percentage points.
Changes in medical and transportation costs can explain much of the decline, according to the Center for Retirement Research.
Medical care costs rose at a faster rate than transportation from 1983 to 2002. Medical care costs were 1.3% more than the average from 2002 to 2021, while transportation costs were less than the average.
The inflation seniors faced was reduced by the slowing of cost growth.
One of the most important issues of retirement is the ability to pay for health-care needs.
It is the reason why the consumer price index was less than the consumer price index in the last year, according to the Center for Retirement Research.
It may be better to use a different measure than the one used for the population as a whole to measure the changing costs of Social Security, according to the research.
The director of the Retirement Research Center said that it might be worthwhile to have a separateCPI for older people or people who are receiving Social Security benefits, than for the rest of the population.
Munnell said that more urgent fixes are needed to improve Social Security's solvency. According to the latest estimates, just 22% of benefits will be paid by 2034.
Munnell said that beneficiaries can take comfort in the fact that rising prices will be factored into next year's COLA.
There is no guarantee that the annual increase will be the same in 2023. The adjustment may be lower if inflation goes down.
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