Implications of a ‘Chained’ CPI

Alicia H. Munnell William M. Hisey

IB#11-12

The brief’s key findings are:

  • Recent commissions have proposed a “chained” consumer price index to adjust Social Security benefits.
  • The chained index, which allows spending patterns to shift as prices change, would rise more slowly than the current index.
  • But the current index likely understates the inflation faced by the elderly, and the low-income elderly may have little flexibility.
  • An alternative way for current retirees to bear some of the burden of a Social Security fix would be a one-time delay in the inflation adjustment.