A Hypothetical Social Security Cost-of-Living Adjustment Based on the Research Consumer Price Index for the Elderly
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A Hypothetical Social Security Cost-of-Living Adjustment Based on the Research Consumer Price Index for the Elderly
Background
Background
The Social Security Administration (SSA) administers Social Security, a social insurance program that protects an insured worker and his or her eligible family members against a loss of income due to the worker’'s retirement, disability, or death. People of all ages receive benefits from the program, with over 6870 million beneficiaries in August 2024October 2025. Monthly Social Security payments for beneficiaries are subject to an annual cost-of-living adjustment (COLA) to account for rising prices (inflation).
The COLA is calculated automatically each year and is intended to reflect the change in the cost of living over a one-year period. Automatic Social Security COLAs became effective in 1975 after being established in 1972 as part of P.L. 92-336. The legislation referred only to the Consumer Price Index (CPI), which at the time was the only version of consumer price index produced by the Department of Labor’'s Bureau of Labor Statistics (BLS) and pertained to urban wage earners and clerical workers. In 1978, BLS revisedrevised the CPI, which was renamed as the CPI for Urban Wage Earners and Clerical Workers (CPI-W), and introduced the CPI for All Urban Consumers (CPI-U). Although the CPI-U was used to escalate tax brackets beginning in 1985, most federal programs continued to use the CPI-W for indexing. . Currently, the CPI-W covers approximately 30 percent% of the population—urban wage earners and clerical workers—that by definition is employed, unlike most Social Security beneficiaries.
Current Law Social Security Calculation
Under current law, the Social Security COLA equals the percentage increase in the average CPI-W from the third quarter of the base year (the last year for which a COLA was applied) to the third quarter of the current year. BLS generally releases the September CPI-W by mid-October, and SSA then computes and announces the COLA. The COLA becomes effective in December of the current year and is payable in January of the following year..
A Consumer Price Index for the Elderly
In response to concerns about how effectively the CPI-W tracks the spending patterns of older consumers, in 1987 Congress directed BLS to introduce an index for the elderly (P.L. 110100-175, §191). BLS developed an experimental consumer price index for Americans 62 years of age and older, commonly called the CPI-E and now designated as a research measure (R-CPI-E). BLS developed the R-CPI-E and constructed values for the series for 1982 and later.
Caveats to Using R-CPI-E
BLS cautions that the R-CPI-E is experimental and has methodological limitations that may affect may impact its accuracy in
reflecting the experiences of the elderly and that any conclusion from analyses should be treated as tentative. Because the R-CPI-E uses the same geographic areas, retail outlets, items selected for pricing, and prices as the CPI-U, the estimates from the R-CPI-E are likely to differ from a price index constructed specifically to measure the experience of Americans ageaged 62 or older. Essentially, the R-CPI-E assumes that Americans 62 or older live and shop in the same places, buy the same things, and pay the same prices as other urban consumers reflected in the CPI-U, though in different quantities.
The underlying population used to calculate the R-CPI-E differs from the population of Social Security beneficiaries. Many Approximately one in eight Social Security beneficiaries areis under the age of 62, such as surviving children and most disabled workers. Additionally, not all people over 62 are Social Security beneficiaries, including the substantialnotable portion of persons aged 62 or older who have not yet claimed benefits.
Alternative COLA Using R-CPI-E
Table 1 provides the calculation of the Social Security COLA using both the CPI-W and the R-CPI-E. The December 20242025 COLA using the R-CPI-E (3.0%) would have been 0.52 percentage points higher than the COLA using the CPI-W (2.5%).
8%).
Table 1. Determination of Alternative Social Security Cost-of Living Adjustment (COLA), December 2024
2025
CPI-W Index
Points
R-CPI-E Index
PointsJuly 2024
308.501
343.324
August 2024
308.64
343.643
September 2024
309.046
344.322
Average for 2024 Q3:
308.729
343.763
July 2025
316.349
353.308
August 2025
317.306
354.317
September 2025
318.139
355.108
Average for 2025 Q3:
317.265
354.244
% change between Q3 averages
2.765%
3.049%
Social Security COLA
2.8%
3.0%
Points
July 2023 299.899 332.545
August 2023 301.551 334.032
September 2023 302.257 335.069
Average for 2023 Q3: 301.236 333.882
July 2024 308.501 343.324
August 2024 308.64 343.643
September 2024 309.046 344.322
Average for 2024 Q3: 308.729 343.763
% change between Q3 averages 2.488% 2.959%
Social Security COLA 2.5% 3.0%
Source: CRS calculations using Department of Labor (DOL), Bureau of Labor Statistics (BLS), data series for the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for 20232024 and 2025, and
A Hypothetical Social Security Cost-of-Living Adjustment Based on the Research Consumer Price Index for the Elderly
https://crsreports.congress.gov
2024, https://www.bls.gov/cpi/data.htm; and DOL, BLS data series for the Consumer Price Index for Americans 62 years of age and older (R-CPI-E) for 20232024 and 2024, 2025, https://www.bls.gov/cpi/research-series/ r-cpi-e-home.htm..
Notes: The December 20242025 COLA applies to benefits payable beginning in January 20252026. The reference base period for the CPI-W is 1982-1984 (i.e., the period when the index equaled 100). The reference base for the R-CPI-E is December 1982. Averages are rounded to the nearest one-thousandth of a point. COLA is rounded to the nearest 0.1% or zero if negative.
Historically, the R-CPI-E has grown faster than the CPI-W has because a larger portion of spending by the elderly goes toward health care expenditures and other items that are weighted more heavily in the R-CPI-E and whose prices tended to rise more rapidly. As a result, switching to the R- CPI-E is generally projected to result in larger COLAs and higher Social Security benefits. A hypothetical COLA based on the R-CPI-E would have equaled or exceeded the current law COLA in all but six years since 1986 (2005, 2008, 2011, 2018, 2021, and 2022), as seen in Figure 1. Over the period from January 1985 to January 20242025, the CPI-W increased about 188197% and the R-CPI-E by 211%.
221%.
W), Hypothetical Alternative COLA (R-CPI-E), and Difference, 1986-2024 Figure Is Interactive 2025
Figure is interactive in the HTML Version of Thisversion of this In Focus
Source: Social Security Administration (SSA), “"Cost-Of-Living Adjustments,”" and CRS calculations using Department of Labor (DOL), Bureau of Labor Statistics (BLS), data series for the research Consumer Price Index for Americans aged 62 (R-CPI-E).
Notes: The COLA for a given year applies to benefits payable beginning in January of the following year (e.g., the 20242025 COLA applies to benefits payable beginning in January 20252026). COLA is rounded to the nearest 0.1% or zero if negative.
January 20252026 Benefits Under an Alternative R-CPI-E COLA
Social Security estimated that the average monthly Social Security benefit payable to all retired workers in January 2025 will be $1,9272026 would be $2,015 before the 2.58% current-law COLA and $1,9762,071 after the 2.58% current-law COLA. Applying the 3.0% hypothetical COLA based on the R-CPI-E instead would result in a $1,9852,075 average retired worker benefit (an additional $94 monthly).
Examples of Legislation (118119th Congress)
Several proposals in the current Congress would replace the CPI-W inamend the current COLA formula with the R-CPI-E or require BLS to construct a formal CPI-E index. These include H.R. 716, H.R. 1046, H.R. 1688, H.R. 3261, H.R. 4583, H.R. 8044, H.R. 9300, S. 393, S. 2280, S. 3974, S. 4877, and S. 5017.
Resources
to use the R-CPI-E alone or in conjunction with the CPI-W. These include H.R. 1700, H.R. 4968, H.R. 5841, S. 770, S. 2614, and S. 3059.
Resources
CRS Report 94-803, Social Security: Cost-of-Living Adjustments
CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustment (COLA)
Social Security 2026 Cost-of-Living Adjustment (COLA) Fact Sheet: 2026Fact Sheet: 2025 Social Security Changes, https://www.ssa.gov/news/press/factsheets/ colafacts2025.pdf
U.S. Bureau of Labor Statistics Factsheet: “"The Consumer Price Index—Why the Published Averages Don’'t Always Match an Individual'an Individual’s Inflation Experience”
Kenneth J. Stewart, “"The Experimental Consumer Price Index for Elderly Americans (CPI-E): 1982-2007,”" Monthly Labor Review, April 2008, pp. 19-24
T. Lynn Sears, Analyst in Social Policy
IF12675
A Hypothetical Social Security Cost-of-Living Adjustment Based on the Research Consumer Price Index for the Elderly
https://crsreports.congress.gov | IF12675 · VERSION 2 · UPDATED
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