A recently updated Congressional Research Service (CRS) report is drawing renewed attention to a long-running question: Should retirement cost-of-living adjustments (COLAs) be based on how retirees actually spend money rather than how working households spend it? The report examines what would have happened if Social Security COLAs had been calculated using the Research Consumer Price Index for Americans Age 62 and Older (R-CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that current law requires.
Historically, the retiree-focused index has generally produced slightly larger annual COLAs, although government researchers continue to caution that the measure remains experimental and is not yet considered suitable as the official replacement for the CPI-W.
For federal retirees, the report is noteworthy because both federal retirement COLAs and Social Security currently rely on the same CPI-W inflation measure (although the FERS COLA applies a different benefit formula).
Key Takeaways
- CRS analyzed what would happen if COLAs were calculated using the R-CPI-E instead of the CPI-W.
- The alternative index has generally produced slightly higher inflation adjustments because older Americans spend a larger share of their income on healthcare, housing, and other categories that have historically experienced faster price increases.
- The Bureau of Labor Statistics (BLS) continues to classify the R-CPI-E as a research measure rather than an official inflation index.
- Several bills introduced in Congress would direct the government to use the retiree-focused index for future COLAs, but none has become law.
Each year, millions of Americans receive cost-of-living adjustments designed to help retirement benefits keep pace with inflation. That includes Social Security beneficiaries, Civil Service Retirement System (CSRS) retirees, Federal Employees Retirement System (FERS) retirees who qualify for COLAs, and federal survivor annuitants. Today, all of those adjustments begin with the same inflation measurement — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
A newly updated CRS report revisits a question that has been debated for decades: Is the CPI-W still the best measure for determining retirement COLAs, or would retirees be better served by an inflation index based on how older Americans actually spend their money?
Why the Debate Continues
The CPI-W measures inflation based on spending patterns of working households whose primary income comes from wage earners. Critics argue that retirees have very different spending habits. Older Americans generally spend a larger portion of their budgets on:
- Healthcare
- Prescription medications
- Medicare premiums
- Housing
- Utilities
These expenses have often increased faster than overall consumer inflation. Because of those differences, some policymakers believe retirement COLAs should reflect retiree spending rather than the spending patterns of younger workers.
What Is the R-CPI-E?
The Research Consumer Price Index for Americans Age 62 and Older (R-CPI-E) is an experimental inflation measure developed by the Bureau of Labor Statistics. Rather than changing the prices collected each month, the R-CPI-E changes the weight assigned to different spending categories based on how households age 62 and older allocate their budgets. Healthcare, for example, receives a larger weight because retirees generally spend more on medical care than younger workers. The goal is to estimate inflation experienced by older Americans more accurately.
What the CRS Report Found
The updated CRS analysis compared what the 2026 Social Security COLA would have been under both inflation measures.
| Inflation Measure | 2026 COLA |
| CPI-W (Current Law) | 2.8% |
| R-CPI-E | 3.0% |
That difference would have increased the average monthly retired worker Social Security benefit by approximately $4 per month. While the annual difference appears relatively small, the report notes that even modest increases compound over decades. Between January 1985 and January 2025:
- CPI-W increased about 197 percent.
- R-CPI-E increased about 221 percent.
During that period, the retiree-focused index produced COLAs that were equal to or greater than the CPI-W in nearly every year.
Why the Government Has Not Switched
Despite producing somewhat higher inflation adjustments, the Bureau of Labor Statistics does not recommend using the R-CPI-E as the official inflation measure. The agency considers it a research index with several limitations.
For example, it assumes older Americans:
- Shop in the same stores
- Purchase the same products
- Pay the same prices
Only the spending weights change. Because the underlying price data remain the same, BLS says the index may not fully capture the inflation actually experienced by retirees. The agency also notes that many Social Security beneficiaries are younger than age 62, while many Americans over age 62 are not receiving Social Security, making the population an imperfect match.
What This Could Mean for Federal Retirees
Although the CRS report focuses on Social Security, the discussion has broader implications for federal retirement benefits. Federal retirement COLAs are also based on the CPI-W. If Congress ever decided to adopt a retiree-specific inflation measure for federal retirement programs, CSRS retirees would generally receive somewhat larger COLAs whenever the alternative index exceeded the CPI-W.
The impact on FERS retirees would be more limited because FERS COLAs are subject to statutory caps. When inflation exceeds certain thresholds, FERS retirees do not receive the full increase measured by the CPI. As a result, changing the inflation index would not automatically produce larger COLAs for every FERS retiree every year.
Could Congress Make the Change?
Yes, but there is no indication that a change is imminent. The CRS report identifies several bills introduced in the current Congress that would replace the CPI-W with the R-CPI-E for determining future COLAs. None of those proposals has become law. Changing the inflation measure would increase projected federal benefit costs over time, making it a significant budget and policy decision rather than simply a technical adjustment.