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2010 cola
Old 12-19-2008, 11:13 AM   #1
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2010 cola

It seems s bit premature to be refering to the 2010 COLA for military retirees, but I thought that this bit from an email that I received from MOAA was interesting.

Quote:
COLA Nosedive for 2010?
The 5.8% cost of living adjustment (COLA) retirees will see in their Jan. 2 paychecks will be the largest one since 1982.
But the new fiscal year is a whole different story, as steeply falling prices have started off next year's COLA calculation in a deep hole. This month, the Bureau of Labor Statistics announced that the consumer price index dropped 2.3% in the month of November.
That makes a whopping decline of 3.8% for the first two months of FY2009 - the biggest two-month drop in more than 60 years.

Quote:
In case you’re wondering: if inflation is negative for the year, there would be no COLA in 2010. Retired pay would not be reduced.
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Old 01-02-2009, 11:54 AM   #2
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Here's an interesting perspective from the Dec 2008 edition of Naval Reserve Association News. This chart compares military pay raises to retiree/Social Security COLAs, but the two are roughly equivalent to the Employer Cost Index (ECI) and CPI.

Year… Military pay… COLA
2009…3.9%............5.8%
2008…3.5%............2.3%
2007…2.2%............3.3%
2006…3.1%............4.1%
2005…3.5%............2.7%
2004…3.4%............2.1%
2003…4.1%............1.4%
2002…4.6%............2.6%
2001…3.7%............3.5%
2000…4.8%............2.5%

Compounded…43.5%...34.7%

I retired in 2002 while my spouse kept working. So my 2003-2009 COLAs have raised my pension by 23% while her pay went up an equivalent 26%. Of course this pay calculation doesn't include pay raises for longevity or targeted ranks, so the actual disparity is more than 3%. Good thing, too-- she worked hard for it and I'd hate for my relative indolence to be keeping pace.

Here's a longer-term analysis from Tom Philpott:
Retired Pay Differences Rise
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Old 01-02-2009, 04:52 PM   #3
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I suspect we'll look back at 2008 as a great COLA year for some time to come. The bump to my Navy retirement plus the same to my SS and my wife's (even though her first check was in December, she still gets the increase) was very nice indeed. I almost feel a little guilty since the confluence of events (high gas and food prices, which largely drove the increase and the current economic crisis) means that I'm doing better, even though I don't work but lotsa people who want to be working or who are working and are just getting by aren't doing nearly as well. Sorta like the "senior discounts" that are available to us now. When we really needed them is when we were in our 30's with kids to raise. I'll certainly take any discount offered, but I sure don't need them as much as I did years ago.
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Old 01-02-2009, 05:41 PM   #4
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Hmm, I think I benefit as a gray area retiree, not sure tho. Maybe I just benefit from the active duty pay raise, as it increases my base pay level?
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Old 01-02-2009, 06:00 PM   #5
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Quote:
Sorta like the "senior discounts" that are available to us now.
Seems like this would be a good time to start a thread that captures all known "senior discounts" that there are in the world.
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Old 01-02-2009, 06:02 PM   #6
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Quote:
Originally Posted by mickeyd View Post
Seems like this would be a good time to start a thread that captures all known "senior discounts" that there are in the world.
We might overload Andy's servers...
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Old 01-03-2009, 10:26 AM   #7
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Maybe I just benefit from the active duty pay raise, as it increases my base pay level?
Yep. Technically it's whatever raise is applied to your retired rank (some ranks may get more than the across-the-board raise) and at the max longevity scale. So you may come out a bit ahead of where you expected, especially since Congress is trying to keep military pay rising at the CPI-- even more at the times when retention is low and recruiting is hard.

Five months before I was retired, my rank was awarded a targeted (higher) raise than the across-the-board number. IIRC it was 5.7% instead of 4.6%. I guess it was intended to improve retention but for some reason it also applied to us over-18-years guys and, of course, went directly into my Final-Pay pension calculation. I chose to interpret it as lifetime deferred compensation for my previous workplace contributions.
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