Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Buying Power of Your Social Security Check - CPI
Old 05-02-2013, 04:35 PM   #1
Thinks s/he gets paid by the post
sengsational's Avatar
Join Date: Oct 2010
Posts: 2,836
Buying Power of Your Social Security Check - CPI

This article
covers how the CPI-W calculation reduces the buying power of a future stream of social security checks by about 1% a year.

A 1% underreporting means that after 30 years, your retirement benefit will be 33% lower than what it would have been had the more accurate measure been used.
It covers how CPI-W does not accurately reflect medical costs and that CPI-E would do that more accurately.

CPI-W only assumes that medical care expenses consume 5.7% of a retiree’s budget. Retirees know instinctively this is a low ball estimate. A recent report by the Urban Institute suggests that out-of-pocket medical expenses are on their way to becoming 18% of a retiree’s total budget. To compensate, the Bureau of Labor Statistics (BLS) has created a relatively new CPI measurement targeting elderly consumers known as CPI-E that counts medical care as a more reasonable 11.6% of the household budget. However, Social Security has yet to switch its CPI calculation to the more realistic CPI-E weightings.
It ends with a sample calculation for how to compensate for the reduced buying power over time.

sengsational is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-02-2013, 07:06 PM   #2
Thinks s/he gets paid by the post
photoguy's Avatar
Join Date: Jun 2010
Posts: 2,229
The source seems really unreliable. On another article on the site they claim 7% inflation which is just ridiculous.

Also the fact that one's personal inflation rate may differ from CPI-W is not manipulation in my books.

photoguy is offline   Reply With Quote
Old 05-02-2013, 07:20 PM   #3
Recycles dryer sheets
Join Date: Mar 2008
Posts: 400
Any activist or advocacy group that thinks the CPI-E has a chance of being implemented in this fiscal environment, is living in a fantasy world.
BLS53 is offline   Reply With Quote
Old 05-02-2013, 07:27 PM   #4
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 3,636
This statement in the link is false

No one but the government confuses a chicken wing with a sirloin steak.
The government (the BLS) doesn't confuse chicken and steak. See page 5 here

However, the quote in the OP is correct. The BLS does calculate a CPI-E that used different weights to better reflect elderly expenses. This is their result for a 29 year period:

From December 1982 through December 2011, the all-items CPI-E rose at an annual average rate of 3.1 percent, compared with increases of 2.9 percent for both the CPI-U and CPI-W.
Consumer Price Index for the elderly : The Editor’s Desk : U.S. Bureau of Labor Statistics

So, if I think the CPI-E is a better measure, it seems that I should plan on losing about 0.2% of buying power each year (vs. the CPI-W).
Independent is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


All times are GMT -6. The time now is 02:22 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.