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Current Cost of Living Adjustments Overcompensate Retirees

Created on May 22, 2013

Current Cost of Living Adjustments Overcompensate Retirees

Chart 2

The current cost-of-living adjustment used to calculate Social Security benefits is a less accurate method of adjusting for inflation than the chained CPI. As a result, Social Security spending rises unnecessarily, which benefits maximum earners more than twice as much as the average retired worker.

Difference compared to chained CPI

2023 Current Index

2023 Chained CPI

AVERAGE RETIRED WORKER

MONTHLY BENEFIT PAYMENTS

MINIMUM WAGE RETIREE

MAXIMUM WAGE RETIREE

Notes: Some figures have been rounded. A maximum wage retiree is a worker who earned the Social Security taxable maximum income or higher in each of his or her working years. In 2011, the taxable maximum income was $106,800.

Source: Heritage Foundation calculations based on data from the Social Security Administration; U.S. Department of Labor, Bureau of Labor Statistics; and Congressional Budget Office forecasts.

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