Oct. 18 is when the Labor Department’s data, on which the January COLA will be based, will be announced. It’s a complex formula and a complex procedure. The yardstick is the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). The idea is to track city-by-city living costs to follow the rise (or fall) of inflation based on a market basket of goods. When living costs for the third quarter (July, August, September) of the current year rise over the CPI level for the previous years’ third quarter, people who get civil service retirement benefits, military retired pay or Social Security get a raise. To further confuse you, this year any 2017 increase will be based on the increase of the CPI from July, August, September of this year (2016) over the same figure for 2014 . The reason for using 2014 as the base year is that retirees didn’t get a COLA this year, based on 2015 numbers.
The September figure, that will be announced next Tuesday, is still unknown. But we do know that if the raise were based on the August CPI data, the January 2017 increase would be a mere 0.3 percent.
Unless living costs jumped dramatically last month (and oil prices have remained low) the final 2017 COLA could be less than $120, on average, for the entire year of 2017. And that’s just the likely average amount for feds lucky enough to have retired after long careers in the old Civil Service Retirement System. For people under the FERS program, which includes most people still working for Uncle Sam, the COLA for retirees is likely to be less than $5 a month!
The average monthly annuity for current retirees under the CSRS system is $3,529 per month. For those retired under the FERS program, the average is $1,355 monthly. FERS workers also qualify for (and pay into) Social Security.
The average Social Security benefit this year is $1,341 per month.
Many retirees think the pending peanut-sized pay raise means there is something wrong. Either the government is fiddling with the numbers for political reasons, or the yardstick the government is using doesn’t take into account the things that retirees need and buy. Jessica Klement, legislative director of the National Active and Retired Federal Employees, says the government should be using another yardstick, the CPI-E which “is a price index that measures consumer prices experienced by those age 62 and older … with seniors spending more money on things like health care, the costs of which are rising at a faster rate than other consumer costs. “ She said the CPI-E “would paint a more accurate picture of the prices based by seniors than the CPI-W” which is now used.