Seniors Losing Out on Thousands Due to Wrong COLA Index – What It Means for Retirees

Seniors Losing Out on Thousands Due to COLA Calculation Method – Here’s Why

Senior couple analyzing Social Security cost-of-living adjustment papers, showing how standard COLA fails to keep up with rising senior expenses.

Every year, retirees, disabled individuals and others receiving Social Security benefits look forward to the annual cost-of-living adjustment, or COLA, which is meant to help their fixed incomes keep pace with inflation. But new research reveals many older Americans are quietly losing out — to the tune of thousands of dollars over a retirement period — because of the way the COLA is calculated.

How COLA is Determined

The Social Security Administration (SSA) uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the annual COLA. Specifically, the average CPI-W for July, August and September is compared to the same period the previous year. If inflation has increased, the difference becomes the next year’s COLA. :contentReference[oaicite:2]{index=2}

However, advocates point out that the CPI-W reflects the spending patterns of urban—and largely working—populations, not necessarily retirees. Many seniors face very different cost profiles: higher medical and housing expenses, fewer commuting costs, etc. That’s where the concern begins.

What’s the Problem? The “Wrong” Index

Research from the The Senior Citizens League (TSCL) and others highlights a significant flaw: if the index tracking inflation doesn’t reflect what seniors actually spend, then the adjustment meant to protect their purchasing power falls short. For example:

The CPI-E (Consumer Price Index for the Elderly) is a separate index that tracks expenses for individuals aged 62 and over, including more weight on health care and housing. :contentReference[oaicite:4]{index=4}
TSCL’s analysis shows that for a retiree who began benefits in 1999, the gap between using the CPI-W versus the CPI-E could amount to nearly \$5,000 in lost benefits over time. :contentReference[oaicite:5]{index=5}
For people retiring more recently, such as 2014 or even 2024, that “loss” could be \$8,000 or \$12,000 respectively across a 25-year retirement cycle. :contentReference[oaicite:6]{index=6}

Why It Matters Now

The timing of this revelation is critical. With inflation still affecting key expenses for older Americans — housing, healthcare premiums, medications — the COLA is supposed to act as a lifeline. Yet, as one recent article notes: “When the COLA doesn’t reflect those real expenses, retirees end up losing thousands of dollars over time.” :contentReference[oaicite:7]{index=7}

Meanwhile, the official announcement of the 2026 COLA has been delayed, in part because of a federal government shutdown. This delay compounds the uncertainty for over 70 million beneficiaries. :contentReference[oaicite:8]{index=8}

How Real Retirees Are Affected

Consider this: a retiree who started receiving Social Security in 1999 and counts on it as a core part of their income may discover that, because of the index issue, their total lifetime benefits are significantly lower than they would have been under a more accurate index. Over time, what might seem like small annual differences become large cumulative gaps.

For example, if your annual COLA increases were underestimated by 0.1 percentage points each year, over 25 years that translates into a noticeable chunk of income you never received. For someone living on a modest budget, that shortfall could affect decisions like whether to take a trip, pay for home repairs, or even manage health costs.

The Debate: CPI-W vs. CPI-E (Also Chained CPI) and the Legislation

Advocates for seniors urge Congress to switch from CPI-W to CPI-E for calculating COLAs. The latter more accurately reflects older adults’ spending patterns. :contentReference[oaicite:9]{index=9}

However, legislation such as the Social Security Expansion Act and the Fair COLAs for Seniors Act has been introduced but stalled in Congress. The hesitancy comes down to cost: adjusting the index upward increases benefit outlays, and with the Social Security trust fund projected to face future shortfalls, lawmakers are cautious. :contentReference[oaicite:12]{index=12}

Trusted Voices Sound the Alarm

TSCL executive director Shannon Benton stated:

“Continuing to calculate COLAs with the CPI-W when the CPI-E is already available is a great example of how Congress refuses to make even small changes that would benefit seniors.” :contentReference[oaicite:13]{index=13}

Similarly, in a recent interview, Kevin Thompson (CEO of 9i Capital) warned:

“When the COLA doesn’t reflect those real expenses, retirees end up losing thousands of dollars over time.” :contentReference[oaicite:14]{index=14}

What Can Seniors Do About It Now?

While seniors often cannot directly change how COLAs are calculated, there are steps to mitigate the impact:

Monitor Notices from the SSA – Watch for the official COLA announcement each year and consider how the increase stacks up to your personal inflation. :contentReference[oaicite:15]{index=15}
Plan for Additional Inflation – Some expenses (healthcare, housing) rise faster than average inflation. Factor that into your personal budget.
Explore Supplemental Income Sources – Since Social Security alone may not cover rising costs, look at part-time work, rental income, or other income streams.
Advocate for Change – Participate in senior advocacy groups or petitions asking Congress to adopt the CPI-E. Your voice counts.

Looking Ahead: Implications for Retirement Planning

The textbook view of “retire and let Social Security cover your living costs” is increasingly unrealistic. With COLAs falling short and healthcare/housing costs climbing, financial advisers say retirees need to think more proactively. As one commentary observed:

“Benefits continue to lose their buying power despite the increases.” :contentReference[oaicite:16]{index=16}

Moreover, with the trust fund for Social Security projected to face depletion in future decades, any upward change in COLA calculation would likely need funding reforms. That’s why many experts say prefacing retirement plans with realistic expense forecasting and not relying solely on COLA is essential.

Key Takeaways in a Snapshot

The COLA increase is determined using the CPI-W index, which critics say doesn’t reflect seniors’ spending patterns.
Using the “wrong” index may be costing many seniors thousands of dollars over retirement. :contentReference[oaicite:17]{index=17}
Legislative efforts to switch to the CPI-E exist but have not advanced. :contentReference[oaicite:18]{index=18}
Seniors should plan for rising costs, supplement their income where possible, and push for systemic reform.
The short-fall in COLA highlights the need for more robust retirement planning rather than assuming benefits alone will suffice.

Conclusion

For millions of older Americans, the annual COLA isn’t just an increase—it’s a key source of financial stability. But when the calculation method underestimates what seniors actually spend, what should protect their purchasing power ends up falling short. The result: thousands of dollars in income lost, year after year.

While changing the policy may take time, this story underscores the importance of staying informed, planning ahead, and advocating for reforms that reflect seniors’ realities. Because even a fraction of a percentage point can mean a considerable difference in quality of life over the decades.

References: TSCL – Seniors Miss Out on Thousands of Dollars in Social Security Payments
Newsweek – Social Security Warning Issued Over COLA
Annuity.org – Social Security COLA: How It’s Calculated