Core Insights - Social Security benefits will increase next year due to the annual cost-of-living adjustment (COLA), but there is a debate on whether a more suitable inflation measure should be used for benefit updates [1][5]. Inflation Measurement Debate - The Senior Citizens League (TSCL) reported that the current inflation measure, CPI-W, results in smaller COLAs compared to an elderly-focused measure, CPI-E [2][3]. - The average CPI-E is approximately 0.1 percentage points higher than CPI-W, with CPI-W tracking inflation for urban wage earners and CPI-E focusing on Americans aged 62 and older [3]. Financial Impact on Retirees - TSCL estimates that retirees from 1999 could have received about $5,000 more in benefits over 25 years if CPI-E had been used instead of CPI-W, while those retiring in 2014 could have seen an increase of over $8,000 [4]. - A statistician from TSCL indicated that a retiree in 2024 could lose around $12,000 over their retirement due to the current COLA calculation method [7]. Legislative Context - The Social Security Administration is mandated to use CPI-W for COLA calculations, requiring Congressional action to change this formula [8]. - Previous attempts by Democratic lawmakers to change the formula have not progressed in Congress [8]. Limitations of CPI-E - The Bureau of Labor Statistics (BLS) acknowledges that while CPI-E has been considered, it has limitations such as a smaller sample size and higher sampling errors [10]. - Critics argue that CPI-E is an unreliable index that may overstate inflation due to its narrow sample size and failure to account for consumer behavior in response to price changes [11]. Alternative Measures - A better alternative suggested is the chained CPI, which addresses the flaws of CPI-E and more accurately reflects consumer responses to price changes [14]. - An analysis from the Cato Institute found that from 2013 to 2022, CPI-W overstated the cost of living increase by 0.26 percentage points compared to chained CPI [15].