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How Much Could Your Benefits Be Cut By Chained CPI?

Thursday, March 28, 2013 - 11:45 AM
The chained US Consumer Price Index (chained CPI) is a measure of price levels of consumer goods and services created by the Bureau of Labor Statistics as an alternative to the US Consumer Price Index. 

The rate of inflation – and, by extension, how one measures it – is significant for several reasons, including the fact that some programs, such as Social Security and Supplemental Security Income, award COLAs (cost of living adjustment) based on the inflation rate. 

Some economists believe chained CPI is a better measure of inflation.  Using this measure results in reductions to the federal deficit through a combination of spending cuts and increased revenues.   

Opponents, however, claim that the current CPI devised for programs for the elderly understates their inflation by not taking into account different buying patterns for different age groups.  Further, changing inflation metrics to the Chained CPI would result in a benefit cut to programs such as Social Security. 

The issue has been discussed frequently in this forum: 

Ripping off needy seniors through the chained CPI,

Chained CPI:  what you need to know,

What's ahead for Social Security in 2013, and

Chained CPI for Social Security not more accurate for seniors

AARP has developed a calculator to help an individual determine how their Social Security or veterans’ benefits would be impacted if Washington changes the cost-of-living-adjustment calculation to chained CPI. 

How would adopting chained CPI as a measure of inflation impact you? 
pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,475
1. Thursday, March 28, 2013 - 12:08 PM
According to the calculator, if chained CPI were used to measure COLA (Cost of Living Adjustment)s for Social Security and veterans' benefits, a 65 year old individual receiving the average annual Social Security benefit of $15,190 would be impacted as follows: 

Over this time period    Reduction in benefits

  5 years                     $   662
10 years                       2,417
15 years                       5,248
20 years                       9,139
pearlbrownpearlbrown1,491 posts since
Nov 2, 2010
Rep Points: 6,475