At the beginning of 2024, seniors who receive Social Security benefits saw their monthly checks increase by 3.2%, an increase that is given by the cost of living adjustment ordinance (COLA).
The COLA is based on the Consumer Price Index for Urban and Clerical Workers (CPI-W), which is calculated by the Bureau of Labor Statistics (BLS). This index reflects the changes in the prices of a basket of goods and services consumed by urban households.
The CPI-W average of the third quarter of a year (July, August, and September) is taken and compared with the same period of the previous year. If the result of the equation is positive, there will be a COLA. If not, the benefits will remain the same until the next annual calculation.
The COLA adjustment that was applied in 2024 pales in comparison to the 8.7% COLA that Social Security recipients got in 2023, but it is still one of the highest in the last 10 years.
A Lingering COLA Problem: Can Biden Solve It?
The COLA adjustments of each year are usually the subject of discussion and debate. One of the most important players in the discussion is the non-partisan Senior Citizens League (TSCL), which recently updated its forecast for COLA 2025: its most recent estimate says that the increase to Social Security benefits will be just 2.66%. It is not as generous as the previous increases, but it reflects a noticeable slowdown in inflation.
TSCL also warned that, between 2000 and 2024, Social Security benefits lost 36% of purchasing power. Much of this loss is due to the way COLAs are calculated.
Here’s Where Biden Comes In: The New COLA Based on the CPI-E
One change that could result in higher QUEUES and better purchasing power for seniors is to base these increases on the CPI-E (Consumer Price Index for Seniors) instead of the CPI-W. President Biden, as part of his plan to strengthen Social Security, supports this change and proposed it as part of his initial presidential campaign strategy.
Biden also supports another change in Social Security that could result in greater purchasing power for seniors: providing a uniform increase to the basic benefit (PIA, or principal amount of insurance) in addition to inflation-based colas. Currently, one of the few ways that a Social Security beneficiary’s monthly benefit increases is through a COLA.
Positive Changes on the Way for COLA Adjustments
President Biden knows that changes are needed to ensure that Social Security can continue to pay full benefits. In addition to the above proposals, Biden is seeking to change the way wages are taxed for Social Security purposes.
Currently, income up to an annual limit is subject to Social Security taxes. From that point on, workers are exempt. This year, the limit is $168,600. Biden wants Social Security taxes reinstated for workers with incomes over $400,000.
To be clear, there would be an exemption for income between the annual limit and $400,000. But from there, the taxes would be applied again.
