Switching to CPI-E could better align Social Security with retirees’ real expenses, especially in healthcare and housing.

Experts argue that the current inflation measure used for Social Security CPI-W underrepresents the cost burden faced by older Americans, and switching to CPI-E could offer more accurate cost-of-living adjustments.

Social Security’s annual cost-of-living adjustment (COLA) is currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index reflects spending patterns of working-age Americans, not retirees.

However, retirees typically spend more on:

• Healthcare
• Prescription drugs
• Housing and transportation

The Consumer Price Index for the Elderly (CPI-E) was developed to better reflect inflation experienced by Americans aged 62 and older. It gives more weight to healthcare and housing two major expenses for retirees.

• In recent years, CPI-E has consistently shown higher inflation than CPI-W, meaning retirees’ expenses are rising faster than their COLA increases.
• For example, in September 2025, CPI-E inflation was nearly 10% higher than CPI-W, largely due to healthcare and rent spikes.

Why It Matters

• COLA under CPI-W has failed to keep pace with retirees’ actual costs, leading to a 20% loss in buying power from 2010 to 2024.
• Switching to CPI-E could result in larger annual benefit increases, helping retirees better afford essentials.

Policy Outlook

• Advocates like the Senior Citizens League and some lawmakers have pushed for CPI-E adoption.
• A bill to switch to CPI-E was introduced in the Senate but stalled due to concerns over Social Security’s long-term funding.
• Critics note CPI-E is still experimental, with a smaller sample size and higher statistical error. It also doesn’t account for senior discounts, which could offset some costs.

Bottom Line

Updating the inflation measure to CPI-E could make Social Security more responsive to retirees’ needs but political and technical hurdles remain. As Medicare costs rise and COLA lags, the pressure to reform the system is growing.

The Social Security Administration announced a 2.8% cost-of-living adjustment (COLA) for 2026, based on third-quarter inflation data. But experts warn this increase falls short of what retirees need to keep up with rising expenses especially as Medicare premiums, prescription drug costs, and housing continue to climb.

The problem lies in how inflation is measured. The current formula uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which reflects spending habits of younger, working Americans. Retirees, however, spend disproportionately more on healthcare and housing categories that have seen sharper price increases.

Advocates suggest switching to the Consumer Price Index for the Elderly (CPI-E), which better tracks inflation for Americans aged 62 and older. CPI-E has consistently shown higher inflation than CPI-W, meaning it could lead to larger COLA increases and better financial protection for seniors.

The 2026 Social Security cost-of-living adjustment (COLA) is set at 2.8%, but it’s already being outpaced by rising expenses. Medicare Part B premiums alone are expected to jump 11.6%, affecting 63 million older and disabled Americans. This mismatch highlights a growing affordability crisis for retirees.

From 2010 to 2024, Social Security benefits lost 20% of their purchasing power, according to The Senior Citizens League. To address this, advocates like Shannon Benton are urging the federal government to adopt the CPI-E inflation index, which better reflects the spending patterns of older Americans especially in healthcare and housing.

The League is also calling for a one-time $1,400 stimulus check to help beneficiaries cope with rising costs. Without reform, millions of retirees may face difficult trade-offs between essentials like food, medicine, and rent.

Social Security is a lifeline for 71 million Americans, with nearly 22 million relying on it as their sole source of income. But as the cost-of-living adjustment (COLA) continues to trail behind actual expenses especially rising healthcare and housing costs many retirees are being forced to reconsider their financial plans.

If COLA remains misaligned with inflation, the consequences are stark:

• Healthcare strain: Medicare premiums and prescription costs are outpacing benefit increases.
• Basic needs at risk: Groceries, rent, and utilities are becoming harder to afford.
• Delayed retirement: More seniors may need to work longer or re-enter the workforce to make ends meet.

This growing gap between benefits and real-world costs is fueling calls to update the inflation formula used for COLA potentially switching from CPI-W to CPI-E to better reflect retiree spending patterns.

The Social Security cost-of-living adjustment (COLA) is currently tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which reflects the spending habits of working-age Americans. But this index fails to capture the real cost pressures faced by retirees especially in healthcare, housing, and transportation.

To better align benefits with retiree expenses, experts like Shannon Benton of The Senior Citizens League advocate switching to the Consumer Price Index for the Elderly (CPI-E). This alternative index tracks inflation for Americans aged 62 and older, giving more weight to categories that disproportionately affect seniors.

Adopting CPI-E could result in:

• Higher COLA increases that better match retirees’ actual cost burdens
• More accurate adjustments for rising Medicare premiums and prescription drug costs
• Improved financial stability for the 22 million Americans who rely solely on Social Security

While CPI-E is still considered experimental and has limitations such as a smaller sample size and lack of senior discount adjustments it offers a more targeted approach to protecting retiree purchasing power.

Retirees face steeper inflation than working Americans, and the data backs it up: in September, the Consumer Price Index for the Elderly (CPI-E) showed expenses nearly 10% higher than those measured by the CPI-W, the index currently used to calculate Social Security’s cost-of-living adjustment (COLA).

Here’s why:

• Healthcare: Medicare premiums, out-of-pocket medical costs, and prescription drug prices are rising fast. A 65-year-old retiring in 2025 is expected to spend $172,500 on healthcare over their retirement, according to Fidelity.
• Housing: Rent and utilities make up a larger share of spending for older Americans, especially those on fixed incomes.
• Transportation: Seniors often keep their vehicles longer, leading to higher maintenance costs. Insurance premiums also tend to rise with age.

These spending patterns aren’t reflected in CPI-W, which is based on younger, working households. That’s why advocates like Shannon Benton of The Senior Citizens League are urging Congress to adopt CPI-E for COLA calculations. Benton emphasizes that while advocacy groups can raise awareness, constituent voices carry the most weight: “They really listen to their constituents. Those are the votes.”

While the Consumer Price Index for the Elderly (CPI-E) offers a more accurate reflection of retiree expenses, it remains an experimental metric with notable limitations. The Bureau of Labor Statistics cites concerns such as:

• Small Sample Size: CPI-E tracks a narrower group of households, increasing the risk of sampling error.
• Data Gaps: It doesn’t account for senior discounts, which could slightly offset costs.
• Lack of Adoption: No federal agency currently uses CPI-E for official policy decisions.

Still, the urgency for reform is mounting. A recent Nationwide survey found that nearly 1 in 3 retirees have cut back on essentials, and 77% say their Social Security checks don’t keep up with inflation. These findings echo broader concerns about the erosion of retiree purchasing power.

Although several Senate lawmakers introduced legislation to mandate CPI-E for COLA calculations, the bill stalled largely due to concerns over Social Security’s long-term solvency. With trust fund depletion looming, any proposal that increases benefit payouts faces an uphill battle in Congress.