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AARP Bulletin

Chained CPI Change Could Hit Veterans' Benefits

Cost-of-living increases will have an impact on more than just Social Security

A proposed formula to calculate cost-of-living adjustments for Social Security and other federal benefits — called the "chained CPI" (C-CPI) — would save money for the government, some budget experts say. But it would also take a disproportionate toll on one group — disabled veterans.

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AARP calculates that a 30-year-old veteran of the Iraq or Afghanistan war who has no children and is 100 percent disabled would likely lose about $100,000 in disability compensation by age 75 (calculated in today's dollars), compared with benefits under the current cost-of-living formula. Over a 10-year period, 23 million veterans would lose $17 billion in compensation and pension benefits, according to AARP calculations.

The C-CPI would also reduce benefits for current and future retirees, costing the average 65-year-old nonveteran retiree about $3,900 in Social Security benefits by age 75.

The Congressional Budget Office says the C-CPI would rise about 0.3 percentage points less each year than the current consumer price index measure. Proponents of C-CPI "grossly underestimate the impact of what may seem like little nicks over time," says AARP senior legislative representative Timothy Gearan.

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Video Extra

Demystifying the COLA Cut Known as Chained CPI: AARP Executive VP and economist Debra Whitman explains why the chained CPI is a growing benefit cut that is most harmful for the oldest and poorest beneficiaries of Social Security.

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