A flat-dollar Social Security COLA under discussion would give every beneficiary the same monthly increase instead of the same percentage, shifting more growth to smaller checks as lawmakers search for solvency fixes.
CRFB says pegging the increase around the 20th percentile benefit level could close about half of Social Security’s 75-year financing shortfall, while AARP says roughly 80% of retirees would get smaller increases than under current law.
AARP estimates a 2.8% COLA that once added about $58 a month for the average retired worker would have been about $34 under a flat formula, a gap it says could compound to $77,900 less by age 93.
Some retirees who pay federal tax on benefits could see slightly lower tax bills because smaller COLAs reduce combined income, though the savings would not fully offset lower checks; about half of beneficiaries now owe such tax.
The debate comes as the retirement trust fund is projected to exhaust reserves in 2032, with 2027’s official COLA still due in mid-October and currently estimated at 3.4% to 3.6%.