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1.7 Percent: The 2013 COLA

Lower inflation figures translate into a lower rise for Social Security and pension beneficiaries

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However, advocacy groups, including AARP, argue that the chained CPI doesn't factor in what older adults spend much of their income on — health care and prescription drugs that generally can't be substituted for lower-cost goods and services.

"Amid rising costs for food, utilities and health care and continued economic uncertainty, the COLA helps keep older Americans from falling into poverty," says AARP Executive Vice President Nancy LeaMond. "In this environment ... it is unfortunate that some on Capitol Hill would suggest making the COLA even smaller by changing the way it is calculated.

"Any proposal to decrease the COLA as part of a deficit reduction deal ignores the real struggles facing many seniors today, and would exacerbate their financial hardships with each passing year."

Even the currently used CPI-W understates the impact on the purchasing power of older adults because it measures the cost of goods and services used by working people in general, downplaying the disproportionate health care spending of retirees, says Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare.

He's been pushing for years for a measure that more accurately reflects seniors' costs, an index called the CPI-E (for experimental).

The CPI-E puts more weight on the basket of goods and services that older adults in particular need. But he says there's resistance to using that index because it would result in a higher COLA and cost the government more money.

Ask Richtman about the possibility that a chained CPI will be adopted by Congress and used next year to compute inflation, and he fumes.

"Most seniors are getting by on $1,200 to $1,300 a month for everything," he says. "That's not easy. I'd like to see members of Congress so intrigued by the chained CPI spend a year living on $13,000 to $14,000 a year."

Kathleen Hastings, a certified financial planner in Bethesda, Md., says the COLA has averaged about 2 percent annually over the last 10 years while prices for food and medical care have gone up much more.

"Areas of inflation impact certain demographics differently," she says. "Those living on Social Security are more vulnerable to inflation and it has more of a negative impact on their lifestyle. There aren't a lot of options for them. It's simply a matter of having to tighten their belts."

Carole Fleck is a senior editor at AARP Media.

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