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An arcane change to the way Social Security’s annual Cost of Living Adjustments, or COLAs, are calculated may be part of a deficit reduction deal between President Barack Obama and Congress. The revision, known as the “chained CPI,” could cut the size of Social Security recipients’ benefits starting in 2014.
You could feel a financial pinch if COLAs get tweaked this way, especially if you’re fortunate enough to live for decades in retirement.
Chained CPI and the Deficit
Deficit cutters like the idea of switching to the chained CPI because it would save the government an estimated $200 billion or so over 10 years.
In addition to reducing the growth in Social Security, the new math also would slow spending increases for many other federal outlays linked to inflation, like veterans benefits and government salaries, and bring in additional tax revenue because tax brackets are adjusted for inflation annually.
How Social Security Measures the Cost of Living
Here’s a plain-English explanation of how Social Security’s COLAs might change and what that would mean for you:
Social Security has provided annual cost-of-living increases tied to the inflation rate since 1975. Next year, beneficiaries will get a 1.7 percent increase in their benefits.
Currently, Social Security makes its inflation adjustments using the Consumer Price Index for urban wage and clerical workers, or CPI-W, which measures changes in the cost of a market basket of goods and services.
http://www.dailyfinance.com/2012/12/18/c…ecurity-b/
2012-12-20 14:36:35
Source: http://yeoldefalseflag.com/thread-how-washington-is-likely-to-slice-social-security-benefits