Biggest retiree COLA in years may be in the works

While many federal workers are sweating the prospect of budget and program cuts, downsizing and wondering if there will be a 2018 — assuming they still have jobs — retirees are in a different place.

They are safe from program and budget cuts but always concerned about prices — especially for things (like medicine) that retirees generally spend more for than regular workers. The good news for the retired folk is that there is a faint pulse in the cost-of-living adjustment (COLA) financial lifeline. Faint, but there.

With only seven months to go in the COLA countdown, federal, postal and military retirees and people who receive Social Security are in line for a 1.03 percent inflation adjustment in January 2018. While that’s not enough to switch from hamburger to the occasional steak, it is progress of a sort retirees haven’t seen in a long time. This year retirees received a tiny 0.3 percent COLA.

The inflation index the government uses to keep federal and Social Security retirees current with inflation (the CPI-W) rose only 0.26 percent in February. But that is 1.03 percent higher than the average for the 3rd quarter of 2016 which will be the base for calculating the 2018 COLA.

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The exact amount of any January 2018 COLA won’t be known until October, when the third quarter (July, August, September) CPI data is in.

There was a time in the 1970s (can you say oil shortage) and through the 1980s when COLAs reflected out-of-control inflation. Retirees got an 8 percent COLA in 1975, 6.4 percent in 1976, 5.9 percent in 1977, followed by 6.5 percent in 1978, 9.9 percent in July 1979 and the granddaddy of them all, 14.3 percent in July 1980.

But in recent years COLAs have been smaller and many retirees believe that’s because the basket-of-goods the government uses to measure inflation doesn’t reflect the levels that older people must have.

Things for retirees started going south when, after a major 5.8 percent COLA in 2009, retirees didn’t get any sort of inflation catch-up in 2010 or 2011. They did get 3.6 percent in 2012. The COLA was 1.7 percent in 2013 followed by 1.5 percent in 2014 and another 1.7 percent in 2015.

The question lots of people are asking is, could Congress and the White House eliminate the next COLA? Short answer is yes, in theory, but highly unlikely in practice.

Most of the people under the COLA system — about one in every six Americans — is under Social Security. It’s long been known as the third rail in American politics.

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Nearly Useless Factoid

By Michael O’Connell

Director David Fincher’s favorite line in his film The Social Network is: “I’m just checking your math on that. Yes, I got the same thing.”

Source: IMDB