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Old 07-22-2013, 07:39 AM   #121
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Originally Posted by Sue J View Post
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%.

Originally Posted by CJHorne View Post
Originally Posted by ERD50 View Post
There were two other options. Increase revenue (taxes), or cut spending (in other areas, or wages, employment, benefits). Or combo. ...
This can be done to only a minor degree. Large increases in tax rates can actually result in less tax revenue over the long term. Employers can move to more tax friendly states creating unemployment. That's why you see many of the northern states lowering tax rates, even in these tough times, to attract industry. Also, if tax increases were excessive, I think taxpayers would protest excessive taxes for benefits most of them do not have themselves!
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.


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Old 07-22-2013, 07:45 AM   #122
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When asked previously if my pension Cola was simple or compounded I responded simple it is really compounded. I was thinking phased on COLAs over a year period.

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Old 07-22-2013, 07:48 AM   #123
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Originally Posted by TuborgP View Post
When asked previously if my pension Cola was simple or compounded I responded simple it is really compounded. I was thinking phased on COLAs over a year period.
The combined COLA for the wife and I is over 10 K in the five and half years since we retired over our original pension amount.
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Old 07-22-2013, 12:26 PM   #124
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Thanks for another lively discussion, everyone.


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