Tag: CPI-E

CPI-E and retirement

CPI-E and retirement

Posted on by Jack

I have previously discussed the use of the CPI-E (Consumer Price Index for the Elderly): Seniors, cost of living and benefit cuts and Strengthening Social Security.

There is a bill in the HOUSE OF REPRESENTATIVES (H. R. 4202) to use the CPI-E in many Federal retirement programs, although I do not see a mention of Social Security. I’m wondering if it does make more sense to start with programs more closely tied to Federal employment (both civilian and military) and perhaps expand the idea to Social Security as the government fiscal situation improves.

Thank you Rep Rangel for sponsoring this bill; and thanks also to the 51 cosponsors. Also thanks to those sponsoring similar bills in both the House and Senate.

Bills to Strengthen Social Security

Bills to Strengthen Social Security

Posted on by Jack

I had written last month about bills to Strengthen Social Security which were bottled-up in committee. And sad to say but that is still the case.

The Strengthening Social Security Act of 2013 was introduced in both houses of Congress (S. 567 sponsored by Senator Tom Harkin and H.R. 3118 sponsored by Representative Linda Sanchez). The Senate bill was introduced last March and has been in the Committee on Finance since then. The House bill was introduced in September and remains with the House Education and the Workforce Committee.

The Strengthening Social Security Act of 2013 bases Social Security COLAs based on the Consumer Price Index for the Elderly (CPI-E). This would be a better index as it is designed to account for the different spending patterns as we enter our senior years.

The bill also addresses some long-term problems to strengthen Social Security.

Much of the present talk around social security today involves cutting benefits. In my opinion this is not the way to go.

I think we need to talk about this. A good first step to my way of thinking would be to get these bills out of committee and allow debate on the floors of congress.

Perhaps a non-political panel would come up with additional ideas and be more willing to discuss long-term solutions. I would guess that most of these people have political opinions but I also think since they don’t have to worry about being re-elected, they might be more willing to consider ideas which don’t necessarily match-up with the ideas of their party.

Strengthen Social Security

Strengthen Social Security

Posted on by Jack

I had previously written about cost of living adjustments (COLAs) in retirement. It is a hard subject since there are many ways to estimate this.

The Bureau of Labor Statistics (BLS; website bls.gov) has developed several tools to estimate this. They developed the Consumer Price Index (CPI) which approximates a cost of living index. But this is not simple to estimate. Continue reading “Strengthen Social Security”

Seniors and cost of living and benefit cuts

Seniors and cost of living and benefit cuts

Posted on by Jack

In President Obama’s budget proposal for 2014, he has suggested that the cost of living adjustments for Social Security and other retirement benefits be tied to the chained CPI rather than the CPI-W.

While this sounds like just a minor technical adjustment and some would argue that the chained CPI is a more accurate way of measuring inflation, this is not the case when dealing with seniors.

The CPI-W is the Consumer Price Index for Urban Wage Earners and Clerical Workers and is used to adjust Social Security and other federal programs. As implied by the name, it is a price index for workers and so does not include the retired.

Given this it is far from certain how well the CPI-W (or even the CPI-U) would reflect price inflation for seniors. So The Older Americans Act of 1987 had the Bureau of Labor Statistics (BLS) develop a new index for price inflation faced by seniors, the CPI-E . Not surprisingly, the CPI-E is a bit higher than the CPI-W.

So the CPI-W which is used to adjust retirement programs including Social Security actually understates inflation experienced by seniors. And now it is proposed the adjustment actually be lowered further.

If Congress wishes to cut Social Security that is certainly within their rights. (Whether it is a good idea is an entirely different question.)

But let us be honest. This is not merely a technical adjustment to increase the accuracy of inflation adjustment. It is a purposeful decrease in benefits which will hurt many of the elderly.