A Flat-Rate Social Security COLA Could Leave Most Checks Behind
AARP says an alternative inflation formula would give about 80% of beneficiaries smaller annual increases, though no change is in effect.
A flat-rate Social Security cost-of-living adjustment would give every beneficiary the same dollar increase, rather than the same percentage increase. AARP says about 80% of recipients would get smaller annual raises under the proposal.
The idea is part of a debate over how to shore up Social Security’s finances. The Committee for a Responsible Federal Budget says a flat-rate adjustment could direct more benefit growth to lower earners and help close part of the program’s long-term funding gap. It is a proposal, not a change in current law.
Social Security’s 2026 COLA was 2.8%, adding about $58 a month to the average retired worker’s benefit. Under the flat-rate example analyzed by AARP, all recipients would instead receive $34.20 a month, based on the benefit at the 20th percentile.
That gap would build over time because future increases start from the newly adjusted benefit. AARP estimates that a typical worker who retired in 1998 could have received about $77,900 less by age 93 under the alternative formula.
Retirees can’t control how Congress may change the COLA, but they can review their own income plan. First, check your Social Security earnings record and benefit estimate through a my Social Security account. Errors in reported wages can affect the benefit calculation.
Second, compare claiming at different ages before filing. For people who can afford to wait, retirement benefits generally rise for each month claimed after full retirement age, up to age 70. The increase can reach about 8% a year, but waiting means relying on other income in the meantime.
Third, map out income beyond Social Security, including savings, a workplace retirement plan, a pension or part-time work. A budget that accounts for housing, health costs and other essentials can show whether savings might bridge a delay in claiming.
The SSA says the current COLA remains tied to the CPI-W inflation index. Watch for any proposed legislation, and check official benefit estimates before making a retirement decision.
This article was produced with the help of AI technology.
Source: Yahoo Finance
