The unseen tax: How flawed inflation calculations quietly erode Social Security benefits

 The Social Security Administration has announced a 2.8% cost-of-living adjustment (COLA) for 2026, aiming to protect the purchasing power of retirees. However, the method used to calculate this adjustment is criticized for not accurately reflecting the actual inflation experienced by seniors, which could undermine their financial security over time.

1. COLA Announcement:

• The 2.8% COLA increase for 2026 brings an average monthly raise of about $56 for retirees.

• This adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which represents workers' spending, not retirees'.

2. Criticism of CPI-W:

• Advocacy groups argue that the CPI-W fails to account for categories like healthcare and housing that disproportionately affect seniors.

• There's a proposal to switch to the Consumer Price Index for the Elderly (CPI-E), which better reflects senior spending habits, but progress in Congress to make this change has stalled.

3. Impact of Inaccurate Calculations:

• The current use of CPI-W leads to COLAs that historically lag behind actual inflation rates faced by seniors, contributing to a gradual loss of purchasing power.

• For example, a retiree with a $1,500 benefit experiences a monthly shortfall if actual inflation is higher than the increase afforded by the COLA.

4. Cumulative Effects:

• While annual shortfalls may seem small, they accumulate over time, resulting in significant financial strain for older Americans who often rely on Social Security as their primary income source.

• The erosion of benefits due to inflation miscalculations can force retirees to choose between necessary items, like food and healthcare.

5. Historical Context:

• The foundation of the Social Security system was to provide inflation-protected benefits for life. However, the reliance on an outdated inflation measure threatens this promise.

• Political discussions often focus on the solvency of the Social Security trust fund, diverting attention from the more immediate issue of inflation miscalculations.

6. Call for Change:

• Advocates stress that a switch to CPI-E is necessary and would provide more accurate adjustments that reflect seniors' realities.

• Without legislative action to adopt a more suitable inflation index, the plight of retirees will likely worsen, as their financial stability continues to erode despite nominal increases in benefits.

The Social Security Administration's recent COLA announcement is a modest increase that fails to adequately address the actual inflation experienced by retirees. The ongoing reliance on the CPI-W index contributes to a long-term erosion of purchasing power among seniors. Transitioning to the CPI-E could provide a better, more realistic evaluation of seniors' economic conditions, allowing them to maintain their standard of living. Without this change, retirees face an increasing risk of financial insecurity in the future. 

https://www.naturalnews.com/2025-10-27-flawed-inflation-calculations-erode-social-security-benefits.html