To COLA or not to COLA…

(Editor’s Note: Mike Causey is on vacation. This column originally appeared October 28, 2011.)

After two years of living off no-cal COLAs, federal retirees are going to get a 3.6 percent increase in January. The COLA will also go to survivor annuitants, military retirees and people who get Social Security benefits. It will be the first inflation-catchup the retirees have had since they got a 5.8 percent raise in 2009.

For how that COLA will work, click here.

It is a different story for people who are still working. When January rolls around, federal workers will enter their second year of a pay freeze.


With all of the above in mind, some people, who are at or close to retirement, are doing the math and wondering if they are working for little or nothing. With the number of agencies offering buyouts and early retirement on the increase, the numbers get even more interesting. Lots of you have contacted us to say that if the boss offers you a buyout, you are out of there. Gone. Departed. Retired.

Several readers said that if they retired — and deductions for things like the TSP and their CSRS or FERS contributions ended — they would be fine financially. A couple of retirees said that when the costs of commuting and maintaining a work-life wardrobe disappear, they are ahead of the game. Maybe not as stylish, but certainly happier.

Which brings us to this interesting question/computation from an Internal Revenue Service employee. Being severely math-challenged I don’t have a clue if she is right or wrong. But somebody out there probably does. Here’s her comment.

“I was thinking (which scares those who know me best) and I have to check with you to see if what I am thinking is right.

With the current pay freeze heading into year two, we are receiving the same pay we were as of January 2010. If the pay freeze continues, we will not see another COLA increase until January 2013 at the earliest, maybe longer.

For January 2011, no one received a COLA increase. January 2012 retirees will receive a COLA of 3.6 percent.

If someone were to have retired between January 2010 and December 2011, (say 30 years service GS-12 step 10) they will receive their high 3 benefit originally calculated plus 3.5%. Say they were receiving $2,500 a month they would start receiving $2,587 per month. BUT if someone who were at the same grade, etc., who would have qualified for the same $2,500 a month, did not retire until sometime in 2012, (say this person is in the same grade/step, etc., as the person who retired previously), they would only receive the $2,500 per month. Of course, if they had more time there could be an adjustment for additional years of service but you get the idea of what I am thinking.

So, unless someone is hanging around hoping they work for an agency offering a buyout, which may or may not happen, or just really can’t find any other way to occupy their time other than put in another few for Uncle Sam, financially they may be better off retiring now as far as long-term retirement income goes.

Just a crazy thought, but I would like to know if it is anywhere near accurate.”

Thoughts? Email me at


By Jolie Lee
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