Tens of millions of older Americans are about to get what may be the biggest raise of their lifetimes. Here's what you should know.
By STAN CHOE, AP Business Writer NEW YORK — Tens of millions of older Americans are about to get what may be the biggest raise of their lifetimes.
Since the 2008 financial crisis, the U.S. government has announced zero increases to Social Security benefits three times because inflation was so weak. HOW IS THE SIZE OF THE INCREASE SET? It's tied to a measure of inflation called the CPI-W index, which tracks what kinds of prices are being paid by urban wage earners and clerical workers.
IS THAT WEIRD? Yes, and some critics have argued for years that Social Security should change to a different measure, one that's pegged to older people in particular. HOW IS THE SIZE SET FOR SOCIAL SECURITY BENEFITS? Through a complicated formula that takes into account several factors, including how much a worker made in their 35 highest-earning years. Generally, those who made more money and those who wait longer to start getting Social Security get larger benefits, up to a point.
"The COLA doesn't take into account where you live or your actual spending patterns," said William Arnone, CEO of the National Academy of Social Insurance."For some people, it's an overstatement of cost of living for, say, small towns in the Midwest versus urban areas like New York, D.C. or Chicago. With many older people choosing to live in suburban areas or rural areas, some will benefit more" than others from the same-sized increase.
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