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FERS Annuity COLA Question
Old 03-18-2016, 03:19 PM   #1
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FERS Annuity COLA Question

Hi, I'm 58 years old and in my second year of retirement under FERS after almost 31 years of Federal service. Before joining up in with this group (which is think is an excellent means of exchanging information) I noted the following information from an old thread in 2014:

"One underappreciated issue with FERS is in addition pensions ~ 1/2 of the old CSRS system, there is no COLA until age 62 and then a reduced COLA (up to 1% loss) each yr after. That will result in a substantial loss in pension over a 30-40 y period. If you do the math based on past inflation, in 30 yrs a FERS pension could easily be reduced 30-60%. Still better than no pension so not complaining, but retirement in the later stages will likely depend heavily on TSP."

I indeed understand that any COLA for my FERS annuity does not start until age 62, but I don't understand the comment made regarding "reduced COLA" as explain in the comment above. Does the FERS annuity indeed decrease over time? Many thanks for replies in this area. Threepeaks
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Old 03-18-2016, 04:06 PM   #2
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Quote:
For Federal Employees Retirement System (FERS) or FERS Special benefits, if the increase in the CPI is 2 percent or less, the Cost-of-Living Adjustment (COLA) is equal to the CPI increase. If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent. If the CPI increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar.
https://www.opm.gov/faqs/topic/retir...9-b2b605155b40
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Old 03-18-2016, 04:44 PM   #3
Confused about dryer sheets
 
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Thanks for the quick reply Tadpole. I had seen the CPI related information on the OPM page for COLA calculation, which led to my confusion about the "reduced COLA" and up to "1% loss" reference in the quote within my posting. Three peaks
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Old 03-18-2016, 05:52 PM   #4
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I think the point of the quote in the original post is that the diet COLA decrease compounds over a long retirement. So I just thought of the automatic 1% in my TSP as a prepay on my missing COLA. The logic made sense to a person growing up in a high CPI era where, if I had been retired, I would have been on a diet every year. As it is, I retired in 2010 and haven't had to drink a diet COLA yet.
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