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CPI-Social Security and COLA's
Old 03-17-2011, 04:01 PM   #1
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CPI-Social Security and COLA's

CPI came out at .5% for february. Thanks to a late run the past three months of .4%,.4%, and .5% looks like at COLA might be in effect for the first time in a couple of years. Inflation rate for fiscal year 2011 is at 2.3% with 4 months to go. So for those fortunate to get soc. security or cola'd pensions you might get a little extra money to spend provided you dont have to pay for food, gas, or health insurance!
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Old 03-17-2011, 04:35 PM   #2
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It's hard to tell from your post whether you think this is a good thing or a bad thing.

It is well known, that CPI doesn't represent your personal basket of goods.

The Bi-Flation concept - is that everthing you need to purchase is going to cost more, and everthing you already own will be worth less.
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Old 03-17-2011, 04:46 PM   #3
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I'm hoping to get a COLA, to help pay for the increased insurance rates.

It sounds preferable to paying the same increased health insurance rates without a COLA.

This year my health insurance costs $12.09 more per month than last year, so my monthly pension/FERS direct deposit is $12.09 less than last year. Maybe this COLA will get me back to where I was. Well, as long as I don't buy food, or gas, or.....
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Old 03-17-2011, 04:50 PM   #4
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...as long as I don't buy food, or gas, or.....
Pay taxes on the increase ...
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Old 03-17-2011, 04:57 PM   #5
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Pay taxes on the increase ...
Party pooper!
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Old 03-17-2011, 05:04 PM   #6
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Originally Posted by MasterBlaster View Post
It's hard to tell from your post whether you think this is a good thing or a bad thing.

It is well known, that CPI doesn't represent your personal basket of goods.

The Bi-Flation concept - is that everthing you need to purchase is going to cost more, and everthing you already own will be worth less.
I kind of framed it that way on purpose. Didnt want to make it pro or anti cola comment. But, for full disclosure if it stays above 2%, I will get a cola on my pension. I read something I didnt know about SS, though. I just assumed it was the past fiscal year CPI, then that is what you get for your cola. But apparently if I'm reading it right, they will go back to the last year there was a cola, and then add it up. But I dont know what that means, will they divide it by the 3 years (because 2008 was last fiscal year we had cpi inflation) to knock the cola down?
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Old 03-17-2011, 05:20 PM   #7
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But apparently if I'm reading it right, they will go back to the last year there was a cola, and then add it up. But I dont know what that means, will they divide it by the 3 years (because 2008 was last fiscal year we had cpi inflation) to knock the cola down?
Since the last COLA came in January 2009, the COLA will be figured using the third quarter (July, August, September) of 2008 as the base. If the third quarter of 2011 is higher than the base number (which is 219.278), the percentage increase will be the COLA.

edit - the base number is 215.495. I inadvertently used CPI-U since my inflation-indexed investments use that. Independent's post (below) reminded me that SS uses CPI-W.
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Old 03-17-2011, 05:22 PM   #8
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I read something I didnt know about SS, though. I just assumed it was the past fiscal year CPI, then that is what you get for your cola. But apparently if I'm reading it right, they will go back to the last year there was a cola, and then add it up. But I dont know what that means, will they divide it by the 3 years (because 2008 was last fiscal year we had cpi inflation) to knock the cola down?
They take the average of the CPI-W index for the third quarter (that's the index itself, not the increase in the index) and compare it to the highest prior third quarter average. The benefit increase is based on that comparison. The drop in the index after the last oil spike busted was the first time that there was an actual CPI-W decrease from one year to the next. But, benefits did not go down, it's a ratchet.

The SS explanation is here: Latest Cost-of-Living Adjustment
You can get CPI-W numbers from the BLS here: Consumer Price Index (CPI) Look for the "Urban Wage Earners and Clerical Workers" database.

(and, of course, you'll find that the CPI-W that SS uses includes both food and energy)
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Old 03-17-2011, 05:34 PM   #9
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They take the average of the CPI-W index for the third quarter (that's the index itself, not the increase in the index) and compare it to the highest prior third quarter average. The benefit increase is based on that comparison. The drop in the index after the last oil spike busted was the first time that there was an actual CPI-W decrease from one year to the next. But, benefits did not go down, it's a ratchet.

The SS explanation is here: Latest Cost-of-Living Adjustment
You can get CPI-W numbers from the BLS here: Consumer Price Index (CPI) Look for the "Urban Wage Earners and Clerical Workers" database.

(and, of course, you'll find that the CPI-W that SS uses includes both food and energy)
Thats good for the SS people. I was afraid that they would take the percentage and divide it by the years of no colas to get the annual increase.
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Old 03-17-2011, 06:17 PM   #10
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Thats good for the SS people. I was afraid that they would take the percentage and divide it by the years of no colas to get the annual increase.
One thing to remember is that the folks whose Medicare Part B premium was being deducted from their SS for the past two years have had no Part B premium increases for two years, since by law, the Part B increase cannot exceed (in $) the SS COLA increase. For many of those folks, the Part B premium increase will offset the SS COLA.
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Old 03-20-2011, 12:53 PM   #11
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I'm hoping to get a COLA, to help pay for the increased insurance rates.

It sounds preferable to paying the same increased health insurance rates without a COLA.

This year my health insurance costs $12.09 more per month than last year, so my monthly pension/FERS direct deposit is $12.09 less than last year. Maybe this COLA will get me back to where I was. Well, as long as I don't buy food, or gas, or.....
$12.00 a month!! Mine went up by $63.00 a month thanks to Obamacare.
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Old 03-20-2011, 01:27 PM   #12
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$12.00 a month!! Mine went up by $63.00 a month thanks to Obamacare.
Yes, I worked two long (seemingly endless?) years beyond FI to get federal retiree health insurance eligibility so my rates are low. I did that after seeking advice here, and most felt I should keep working until I qualified. They were right though I had been hoping to hear something else, at the time.

Federal employee/retiree BCBS Standard (the oft-maligned "Cadillac plan") for an individual went up from $175.09/month in 2010, to $187.18/month in 2011.
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