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I went to the CPI Detailed Report for October 2014
, Table 24C, Page 110 and used the Chained CPI October to September (2013 - 2014 fiscal year) average monthly indices to calculate the equivalent applicable 2015 COLA rate. The tables also included slightly updated numbers for the prior two years, but these didn't make any difference to the prior years. The theoretical Chained CPI COLA works out at 1.5 percent versus the CPI-W rate of 1.7 percent. That's a 0.2 percent difference. How would that affect benefits for 2015?
The average Social Security benefit paid out in 2014 was $1,294 per month or $15.428 for the calendar year.
For 2015, the average monthly payment will increase to $1,316 for an increase of $22 per month or $264 extra for the calendar year.
If the lower Chained CPI of 1.5 percent was used, the annual increase would be about $233 for the year, or $31 less than the what will actually be paid out for Social Security beneficiaries in 2015. Annual numbers: $15,792 versus $15,761.
However, if you looked at the average CPI's over the last 6 years, the average annual Chained CPI increase works at 1.5 Percent versus 1.4 percent for CPI-W. Not a lot of difference.
AS I said in my post from last year, I don't like the currently used CPI-W for COLA because it only compares three months (July, Aug, Sep) of one year to the same three months of the prior year. The Chained CPI considers 12 months.
I agree, however, that the basket of goods and services for different demographics do not necessarily reflect the spending habits of different senior groups. I spend a lot on travel and leisure now (I'm 68) but I can understand that in another 10 years (if I live that long) my spending habits will change. It is hard to find a single basket of goods and services that applies to everyone.
So I maintain that use of the Chained CPI versus the CPI-W is not that big of a deal, and we shouldn't get worked up about something that has less of an effect on our well being than many of the other provisions in the determination of annual Social Security and Medicare benefits.