Originally Posted by Sue J
The OPERS COLA is 3% fixed based on your first year of retirement. It's not compounded. ...
I was curious about the difference between compounded and not, and I was surprised - the delta was less that I would have thought.
My simple spreadsheet, assuming the 3% would happen every year (unlikely, for a capped COLA), shows that for every $100, over 30 years:
A non-compounded 3% pays $4,305 in total.
A compounded 3% pays $4,758 in total.
To deliver that same $4,758, a non-compounded 3% would need to start @ $110.50 rather than $100.00.
And for reference, a non-COLA $100 over 30 years would pay the simple multiple, $3,000. And would need to be $158.58 to match the compounded 3%, or $143.50 to match the non-compounded 3%.
That was part of my point. If tax rates were increased in real time, the debate could have taken place. We would have seen any effect on business. It may have brought about changes back when relatively small changes could have had a larger effect.
Cutting spending in other areas also sounds simple, but is not so easy in practice.
That may be, but math is math. If the money isn't there, they need to raise revenues (which doesn't necessarily mean raise taxes, but most likely does), or cut spending. Municipalities and States cannot print money. I'm not saying any of it is easy.