FOR IMMEDIATE RELEASE
November 16, 2011
AARP Welcomes Initiative to Change COLA Calculation to Accurately Reflect Retirees’ Spending
WASHINGTON – AARP today released the following statement from Nancy LeaMond, Executive Vice President of AARP, regarding the Consumer Price Index for Elderly Consumers Act. This legislation, sponsored by Senators Sherrod Brown (D-OH) and Barbara Mikulski (D-MD) seeks to make more accurate the inflation index upon which the Social Security annual cost of living adjustment is based. The text of the statement follows:
“AARP applauds the leadership of Senators Sherrod Brown and Barbara Mikulski to ensure that the millions of Americans who rely on Social Security benefits receive a more accurate cost of living adjustment based on the rising cost of the essential goods that seniors purchase. Particularly at a time when the Joint Select Committee on Deficit Reduction (aka the supercommittee) is considering making harmful reductions to Social Security benefits through the adoption of the Chained CPI, this legislation is more important than ever to ensure that millions of current and future Social Security beneficiaries receive the cost of living adjustments they need and deserve.
“The current index that is used to calculate the Social Security COLA (CPI-W) measures the cost of a market basket of items the average American worker purchases each month – an index that does not include the purchasing patterns of most retirees. Seniors spend more on health care than workers, in general. As a result, the COLA is currently based on an index that already under-reports the rapidly increasing costs disproportionately experienced by seniors, and as such results in a lower than warranted COLA. If accuracy in estimating inflation is the goal, as some have argued to justify the adoption of Chained CPI, then the first step that must be taken to properly calculate the market basket of goods that are purchased by retirees is to cease the use of an index that under-estimates the actual rate of inflation experienced by older Americans.
“Social Security is currently the principal source of income for nearly two-thirds of older American households receiving benefits, and roughly one third of those households depend on Social Security for nearly all of their income. Half of those 65 and older have annual incomes below $18,500, and many older Americans have experienced recent and significant losses in retirement savings, pensions, and home values. Today, every dollar of the average Social Security benefit of about $14,000 is absolutely critical to the typical beneficiary.”
AARP is a nonprofit, nonpartisan organization with a membership that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world's largest-circulation magazine with nearly 35 million readers; AARP Bulletin, the go-to news source for AARP's millions of members and Americans 50+; AARP VIVA, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.