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COLA Watch
Old 04-17-2009, 04:09 PM   #1
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COLA Watch

I received this COLA message in an email form MOAA. If you have a COLA pension, heads up.

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The Bureau of Labor Statistics announced this week that the consumer price index (CPI) rose 0.2% in March.

The CPI is the measure used to make annual cost-of-living adjustments to military retired pay, survivor benefits, Social Security and other federal pensions. The CPI rose 0.2% March.

Even with that small gain, the CPI is still down 3.8% so far for this fiscal year. Unless the CPI gains about 4% or more over the next six months, there won't be any retired pay COLA for 2010.


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Old 04-17-2009, 04:15 PM   #2
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Originally Posted by mickeyd View Post
I received this COLA message in email form MOAA. If you have a COLA pension, heads up.
Mickey, correct me if I'm wrong, but I don't think that counts for military retired COLA. Congress, in all its puzzlement wisdom, bases our COLA on the average inflation for the last three months of the fiscal year, so between July and Sep. That's why we made out so well last year, because we had good inflation for those three months, then went into deflation. I still don't think we'll get a COLA this year, but we have to wait and see what happens between July and Sept. The fact that you got that message from MOAA, though, makes me wonder if they've changed the system.
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Old 04-17-2009, 05:40 PM   #3
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In reality, if the CPI is down for the year, "no COLA adjustment" is actually better than a COLA adjustment, isn't it?

Yeah, I share the skepticism about the CPI and about "real" retiree inflation with health care and all that. But in reality, isn't not getting a COLA better than getting a COLA when the CPI is down? Because if a pensioner gets a COLA when the CPI falls, they'd get their pensions cut...
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Old 04-18-2009, 07:28 AM   #4
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Originally Posted by FinallyRetired View Post
Mickey, correct me if I'm wrong, but I don't think that counts for military retired COLA. Congress, in all its puzzlement wisdom, bases our COLA on the average inflation for the last three months of the fiscal year, so between July and Sep.
My understanding was that they compare the absolute figures for the last quarter this year to the last quarter last year - not the relative trend in those months. If we fall in the first three quarters (Oct - June) we have to make up all that ground to get the final quarter up beyond the one a year ago. The reason for three months instead of a point in time being to avoid basing the COLA on some brief anomaly. But, then, maybe I understand wrong. It would certainly seem nuts to base it on the direction the arrow is moving during one quarter.
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Old 04-18-2009, 08:27 AM   #5
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Sadly, we have already been put on notice that if the market continues to be poor performing, we can kiss our COLA goodbye. In the meantime, our electric, water and sewer, medical premiums, insurance premiums, and the cost of Jelly Bellys have all gone up. What a bite! On the "brightside", DH got a 1.5% raise this year. However, it was exactly the same increase for the parking garage which they take right out of his pay.
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Old 04-18-2009, 12:38 PM   #6
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Originally Posted by FinallyRetired View Post
Mickey, correct me if I'm wrong, but I don't think that counts for military retired COLA. Congress, in all its puzzlement wisdom, bases our COLA on the average inflation for the last three months of the fiscal year, so between July and Sep. That's why we made out so well last year, because we had good inflation for those three months, then went into deflation. I still don't think we'll get a COLA this year, but we have to wait and see what happens between July and Sept. The fact that you got that message from MOAA, though, makes me wonder if they've changed the system.
It is my uninformed idea that all federal COLA adjustments are the same % each year. I do not believe that the military is different than the federal worker's COLA.
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Old 04-18-2009, 01:43 PM   #7
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It is my uninformed idea that all federal COLA adjustments are the same % each year. I do not believe that the military is different than the federal worker's COLA.
actually all retired federal COLAs are the same. the active duty military and the federal workers COLAs are not necessarally (most often aren't) the same as the retired COLAs as they are decided by congress on a yearly basis.
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Old 04-18-2009, 03:53 PM   #8
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actually all retired federal COLAs are the same. the active duty military and the federal workers COLAs are not necessarally (most often aren't) the same as the retired COLAs as they are decided by congress on a yearly basis.
You're correct. I should have made my statement clearer that I was refering only to retired COLA pensions.
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Old 04-18-2009, 07:19 PM   #9
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Married to a Federal retiree, I keep close watch on the COLA and other issues at www.fedweek.com. (Lots of useful info there). The retiree COLA is based on a monthly, cumulative "count" of rises and falls in the CPI during the Fiscal Year (1 October through 30 September). As has been stated, a negative cumulative CPI results in a COLA that stays the same.
(I am not sure how Social Security COLAs work, since we don't get SS).
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Old 04-18-2009, 07:22 PM   #10
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Originally Posted by ziggy29 View Post
In reality, if the CPI is down for the year, "no COLA adjustment" is actually better than a COLA adjustment, isn't it?

Yeah, I share the skepticism about the CPI and about "real" retiree inflation with health care and all that. But in reality, isn't not getting a COLA better than getting a COLA when the CPI is down? Because if a pensioner gets a COLA when the CPI falls, they'd get their pensions cut...
The COLA may result in an increase, but never a decrease of the pension. There would just be no increase.
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Old 04-18-2009, 07:22 PM   #11
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Sorry, i meant www.fedweek.com
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Old 04-18-2009, 07:34 PM   #12
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My understanding was that they compare the absolute figures for the last quarter this year to the last quarter last year - not the relative trend in those months. If we fall in the first three quarters (Oct - June) we have to make up all that ground to get the final quarter up beyond the one a year ago. The reason for three months instead of a point in time being to avoid basing the COLA on some brief anomaly. But, then, maybe I understand wrong. It would certainly seem nuts to base it on the direction the arrow is moving during one quarter.
I don't know about that, I'm just going by what I read in various publications, that seem to indicate that a last quarter year over year comparison is all that matters. So, for example, let's say inflation for the last three months in year n is 3.5%. Say in year n+1 it is 4.5%. The COLA would be 1%. And it would not matter if the first nine months of year n+1 had, say, a deflation of any amount, only the last three months count. This seems strange, and I don't want to believe this is the way they do it, but here is a quote from the Army Times.

The rate of inflation may rise and fall throughout the year, but the exact increase in retired pay is based only on the average inflation rate over the last quarter of the fiscal year that runs from Oct. 1 to Sept. 30. The size of the increase is equal to the difference between the average inflation rate in that quarter and the average inflation rate in the same quarter of the previous fiscal year. For the purposes of military retired pay, this means the only months in which inflation matters are July, August and September.

Retiree COLAs: Tracking Inflation - Money, Military Retirement - Army Times
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Old 04-18-2009, 09:33 PM   #13
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here is how it was done for this last year complements of the SSA.


Computation of 5.8-percent COLA
For the December 2008 COLA, we measure the increase in the average CPI-W from the third calendar quarter of 2007 to the third quarter of 2008. These averages are 203.596 and 215.495 for the third calendar quarters of 2007 and 2008, respectively, and are derived from monthly CPI-Ws developed by the Bureau of Labor Statistics.

CPI-W for—
Month 2007 2008
July 203.700 216.304
August 203.199 215.247
September 203.889 214.935
Total 610.788 646.486
Average (roundedto the nearest 0.001) 203.596 215.495

The percentage increase in the CPI-W from the third quarter of 2007 through the third quarter of 2008 is 5.8 percent. The calculation of this percentage increase is as follows (rounded to the nearest one-tenth of one percent):
(215.495 - 203.596) / 203.596 x 100 = 5.8 percent.
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Old 04-19-2009, 12:28 AM   #14
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The index is currently at 207.218. It would have to get above 214-217 by this Jul-Sep, in order to get a COLA. I don't see that happening.
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Old 04-19-2009, 07:03 AM   #15
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here is how it was done for this last year complements of the SSA.
Thanks, jdw, that example nails it.
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Old 04-19-2009, 07:24 AM   #16
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As the beneificiary of a COLA'd military pension, I am interested in knowing how the government calculates it. Thanks for that info.

Still, it seems to me that the costs of the goods and services I use are either flat or declining slightly over the past several months. So if we retirees don't get a COLA this year, no biggie, it seems to me.

In fact, as Ziggie points out, in deflationary times we folks with a COLA'd gov't pension benefit pretty strongly given the fact that we can't legally receive a negative COLA adjustment. Arguably, we are making out like bandits if the COLA adjustment can only go up but not down. It makes me feel bad-- but only momentarily. I rationalize it by thinking that I am an engine of the stimulus, and that it is my duty to recieve money and pump it into the economy!
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Old 04-19-2009, 06:56 PM   #17
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Thanks, jdw, that example nails it.
your welcome
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Old 04-19-2009, 07:01 PM   #18
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As the beneificiary of a COLA'd military pension, I am interested in knowing how the government calculates it. Thanks for that info.

Still, it seems to me that the costs of the goods and services I use are either flat or declining slightly over the past several months. So if we retirees don't get a COLA this year, no biggie, it seems to me.

In fact, as Ziggie points out, in deflationary times we folks with a COLA'd gov't pension benefit pretty strongly given the fact that we can't legally receive a negative COLA adjustment. Arguably, we are making out like bandits if the COLA adjustment can only go up but not down. It makes me feel bad-- but only momentarily. I rationalize it by thinking that I am an engine of the stimulus, and that it is my duty to recieve money and pump it into the economy!
and your welcome too. federal pensions receipiants (including SS) should make out really well on this considering there was a 5.8% COLA for this year, probably will miss a reduction next year and then the slate is clean to get a COLA again in 2011, since the 2011 COLA will be based on 2009 3rd qtr to 2010 3rd qtr. what i am saying is the cpi wont have to get above what is was in the 3rd qtr of 2008 to get a COLA in 2011
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Old 04-19-2009, 07:35 PM   #19
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The stimulus FITW reduction will act as sort of a COLA this year.

Military Pension tax issue
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