Guvmint COLA up 5.8%

[FIRE'd@51]

And the return on I-bonds and TIPS can never be negative, either.

In the case of TIPS, the inflation premium, which is added to par, can be reduced (but not below 100) if there is deflation. Theoretically, this could result in a negative return during a period in which deflation exceeded the coupon.

 

[Brat]

That is a blessing since husband and I pay Medicare A, and B plus Fed Blue Cross family coverage. When DH commented on the increase in SS and my small CSRS I told him not to plan on any gain.

 

[Midpack]

Not work and get 5.8% or work and (in my case) get 2%. Hmmm....

I am not sure how this is fair at all. I don't know of anyone working who will get a 5.8% increase. Flame away...

 

[donheff]

How is it not fair midpack - it is, in effect, a contractual obligation. Take, for example, a military retiree. He or she made a commitment to serve the US 20+ years at pay rates far below private sector and with tough working conditions. One of the compensations he was promised in return was a lifetime pension with COLA. Should the government renege on that promise now? If so, how about they renege on paying back the principle on your treasury bonds?

 

[OhSoClose]

As a military retiree, I agree one hundred percent with Heff.

Yeah, and I bought about $25,000 in I Bonds back in the early 2000s when the fixed rate portion of the bond was high. I stopped buying I Bond in about 2004 as the fixed rate portion dropped.

I am curious though, can someone explain why an I-bond with a fixed rate of 1% might still be attractive, but that (as I have seen elsewhere on this board) that a TIPS with a real rate of return of two percent or less is not so attractive? Is it only because of the tax deferral aspect of the I Bond?

OhSoClose

 

[Midpack]

How is it not fair midpack - it is, in effect, a contractual obligation. Take, for example, a military retiree. He or she made a commitment to serve the US 20+ years at pay rates far below private sector and with tough working conditions. One of the compensations he was promised in return was a lifetime pension with COLA.

I am not saying this is easy. But if SS remains as is, the demographics (ratio of workers to retirees) are working against us to begin with, ie, active workers will most likely have to pay more into SS to support retirees in the decades ahead. This is only one year, but if the real wages of active workers have not kept up with COL and aren't expected to in the decades ahead - doesn't that make it even more onerous for active workers to support retirees going forward? My 86 year old father, also a military retiree, now admits/realizes that he probably lived during the golden age of pensions/retirement. If anything, his standard of living has improved during the 26 years he (and Mom) have been retired...

And how many of us were promised lifetime pensions and health care in the Corp world, who have now lost them years into our careers? I am one of millions who fall in that camp. 14 years ago, at 17 years into my career, it was all taken away. My pension was frozen (no more company contributions) which means the cash value at 65 will be about equal to a car payment - and health care was summarily taken away. And I can't access it early to invest myself.

I am only suggesting we're going to have to share the burden across all. Is it fair for one generation to take a 'you owe me no matter what happens' POV while other generations can't?

Again, this is not easy...

 

[Texarkandy]

MidPack - The government and the military are very different animals than the private business sector (& why I favor mixing them as little as possible).

I noticed in quoting donheff you failed to include his last two sentences:.

Should the government renege on that promise now? If so, how about they renege on paying back the principle on your treasury bonds?

Care to address the last question?

 

[Midpack]

MidPack - The government and the military are very different animals than the private business sector (& why I favor mixing them as little as possible).

I noticed in quoting donheff you failed to include his last two sentences:.



Care to address the last question?

That's a very convenient POV, but no reason. Why should federal employees be immune to what everyone else has been subjected to for decades economically? I am not advocating they suffer more, only that we all share the burden.

I have never owned treasury bonds and it's not something I know a lot about, that's why I didn't answer.

 

[Texarkandy]

And while we are contemplating breaking implicit government contracts with the people since: "we're going to have to share the burden across all. Is it fair for one generation to take a 'you owe me no matter what happens' POV while other generations can't?"

Let's start taxing IRA's & 401k's (retroactively even) & change banking regulations so that if a bank is in trouble they can just change the terms of CD's to suit them. Let's allow lenders to increase the interest rate on loans as necessary.

 

[Midpack]

And while we are contemplating breaking implicit government contracts with the people since: "we're going to have to share the burden across all. Is it fair for one generation to take a 'you owe me no matter what happens' POV while other generations can't?"

Let's start taxing IRA's & 401k's (retroactively even) & change banking regulations so that if a bank is in trouble they can just change the terms of CD's to suit them.

Before we move on to IRA's, 401k's and CD's, please tell me why federal employees should me immune from what I posted:

And how many of us were promised lifetime pensions and health care in the Corp world, who have now lost them years into our careers? I am one of millions who fall in that camp. 14 years ago, at 17 years into my career, it was all taken away. My pension was frozen (no more company contributions) which means the cash value at 65 will be about equal to a car payment - and health care was summarily taken away. And I can't access it early to invest myself.

 

[Rustic23]

Employees vs Retirees

Do you make a difference? An employees wages may be cut. His cola may not be the same as inflation.

I worked for a county. We got a 3% cola every two years sometimes 3. No way that kept up with inflation. I had a choice. Retirees on the other hand are dealing with a promise to pay.

The fact that a Studebaker may no longer keep it promises is bad. If the U.S. Government does not keep it's, would be catastrophic.

As is, the government has played with the 'Inflation Index' to the point that the COLA does not accurately reflect inflation and retirees have been taking it in the shorts for years. Where is your anger?

 

[Texarkandy]

My point is that the US Government needs to be viewed as stable & trustworthy and a fair enforcer and arbitror of contracts (for many reasons) - and therefore cannot go around changing the terms of it's own contracts (or perceived contracts) willy-nilly in mid-stream. This would not be good for the country or the world.

Now I am not opposed at all to consideration of reducing federal spending on new commitments made by both the government & the military. Reducing the federal workforce. Reducing the size of the military (hey, how 'bout that non-interventionist foreign policy some candidate suggested! That'd save a lot of federal bucks) Changing the terms of employment for new hires, etc, etc Reagan already did that once in the 80's when he created the new "improved" federal retirement system called FERS. One example of the "improvement" is that COLA for fed gov. retirees under FERS is CPI minus 1% now. The reduced Pension folks get under FERS (1% per year of employment) only accounts for 1/3 of the retirement benefit for FERS retirees nowadays - the other two thirds is TSP (essentially a 401k invested in either T-Bills or the private sector) and , gasp, Social Security. I personally know folks close to retirement who have taken it in the shorts lately in the value of their TSP (some to the tune of X00-K) - just like folks in the private sector with their 401k's, imagine that!

Were I not eligible for the special law enforcement retirement provisions (that Congressmen & Senators get) I would have quit the feds a long, long time ago. I don't think the current federal retirement provisions are worth it (no offense to regular FERS folks - that's just me)

 

[Midpack]

My point is that the US Government needs to be viewed as stable & trustworthy and a fair enforcer and arbitror of contracts (for many reasons) - and therefore cannot go around changing the terms of it's own contracts (or perceived contracts) willy-nilly in mid-stream. This would not be good for the country or the world.

With all due respect (really), I still don't see where you're answering the "immunity" question. Is it OK for active and retired MegaCorp employees to have the same promises taken away? It's been going on for decades...

 

[Midpack]

As is, the government has played with the 'Inflation Index' to the point that the COLA does not accurately reflect inflation and retirees have been taking it in the shorts for years. Where is your anger?

I'll get flamed as I've seen posts on this before, but it's not been obvious to me that CPI-U is not accurate. And I've never seen anyone show data to prove it. Most attempts I've read seem to skirt the change in quality, substitution, new variables.

 

[Texarkandy]

I never said it was "OK" for MegaCorp employees to have their promises taken away. Are you suggesting that it's "OK".

But because that has happened to some that makes it "OK" to do so to federal & military retirees in your book?

I heard of a guy in Afghanistan who killed his sister over a matter of "honor" - so it's "OK" for me to kill my sister then?

 

[Texarkandy]

With all due respect (really), I still don't see where you're answering the "immunity" question. ....

Perhaps 'cause we have the guns & internment camps & we take care of our own ?

 

[Rustic23]

So you are of the bent that it is OK to substitute dog food for steak, because after all that's what people do when meat protein increases in price.

Life is not fair! Your mega corp canceled your pension. As Texarkandy said, therefore every bodies pensions should be canceled, or 'the government should make mine good'

Here is the classic example of wanting the Government to take care of us. Companies offer benefit packages to attract workers. How do workers insure these companies will keep their promises. Well, while I am not particularly in love with Unions, that's one way. The other is workers leave and work for a company they think will.

If I were you I would think long and hard before I ask the Government to delve deeper into my life.

 

[Midpack]

I never said it was "OK" for MegaCorp employees to have their promises taken away. Are you suggesting that it's "OK".

The elimination of MegaCorp pensions and health care are a reality, so the question of OK is immaterial now. And I am not even suggesting that SS benefits or Fed Emp pensions and health care we eliminated as they have been in the private sector. What I questioned was COLA increases, especially now, when the private sector has had no such thing for decades.

But we're going in circles as your subsequent post shows, so we'll have to agree to disagree...

 

[Texarkandy]

Perhaps I was off on a rant misconstruing what you are saying.

Are you talking about the annual pay increase for active federal employees & active military that congress & the pres have a big pretend argument every year over how much it should be? Those are not COLA's btw & there is no implicit contact/promise from the govt to the employees as to those - & they have been canceled before in years past. (I'm not voting for it! But I could understand it. That's just my personal pocketbook talking.)

(Actually, there is legislation, passed in the early '80's I think, that specified a formula by which the annual fed & mil pay increase is to be set, however the statute has a loophole allowing the President to waive the formula for emergency economic reasons and every Pres has done so every year since the law was passed!)

I believe SS/Fed Pension COLA calculations are set by statute, however. You'd need legislation & those are a different matter IMHO.

So, what would be the vast economic benefit to the country of cutting COLA's to federal govt & military retirees? Have you any numbers on how much military & fed retiree pension COLA's are dragging our economy down? Or is it more of a "feel-good" suggestion.

 

[Midpack]

Here you go

So you are of the bent that it is OK to substitute dog food for steak, because after all that's what people do when meat protein increases in price. That's a fair criticism re: substitition. But should COLA increase to provide 40" LCD/plasma TV's now instead of 19" CRT TV's? Should COLA increase to provide cell phone contracts instead of (cheaper) landlines? Should COLA increase to provide the far superior technology and safety features of a 2008 Chevrolet Impala vs a 1970 model? Should COLA increase to provide for a PC and internet subscription that no one had in 1970? Should COLA increase to allow the average homeowner to have a 2349 sqft home (2004) vs a 1500 sqft home (1970)? I could go on and on. I think CPI-U should reflect increases due to cost, but not for all leaps in technology. If your TV is going to cost 5 times what you last one cost, you should have to cut expenses somewhere.

Life is not fair! Your mega corp canceled your pension. As Texarkandy said, therefore every bodies pensions should be canceled, or 'the government should make mine good' My point was just the opposite. I never said it wasn't fair that MegaCorp cancelled my pension. I never said Fed Emp should lose their pension or health care which would be the equivalent. What I did say was having their benefits preserved AND receiving COLA adjustments well above the private sector was something that did not see fair.

Here is the classic example of wanting the Government to take care of us. Companies offer benefit packages to attract workers. How do workers insure these companies will keep their promises. Well, while I am not particularly in love with Unions, that's one way. The other is workers leave and work for a company they think will.

If I were you I would think long and hard before I ask the Government to delve deeper into my life.

 

[Midpack]

Perhaps I was off on a rant misconstruing what you are saying.

Are you talking about the annual pay increase for active federal employees & active military that congress & the pres have a big pretend argument every year over how much it should be? Those are not COLA's btw & there is no implicit contact/promise from the govt to the employees as to those - & they have been canceled before in years past. (I'm not voting for it! But I could understand it. That's just my personal pocketbook talking.)

I believe SS/Fed Pension COLA calculations are set by statute, however. You'd need legislation & those are a different matter IMHO.

So, what would be the vast economic benefit to the country of cutting COLA's to federal govt & military retirees? Have you any numbers on how much this is dragging our economy down?

In hindsight, I've caught myself on rants before if that makes you feel any better. Instead of repeating myself, see post #1, #2 & #28. And no I don't have numbers, but conceptually why shouldn't we all share the burden (ie, on average the private sector will get nowhere near 5.8% and many will be unemployed - why is one group immune)?

 

[OAG]

Gee, I do not know what the average SS benefit is but I think it is well below $1,000 a month. If it is, 5.8% is less than $58 a month (or less than $696 a year). That amount will not even pay most peoples heating bill for the winter. Funny, there was a lot less complaining last year when I think the increase was about 2.3%.

 

[Texarkandy]

..... (ie, on average the private sector will get nowhere near 5.8% and many will be unemployed - why is one group immune)?

Once again - are you referring to active military/civil service or retired? Two different systems.

The 5.8% applies to Military retires & civil service CSRS retirees ( CSRS = those who began federal civil service employment prior to 1/1/1984)

FERS retirees (post 1984 civil service) get 4.8%.

For active military/civilian employees congress/Pres this year passed a 3.9% average pay increase (not a COLA) some will get more, some will get less depending on what "locality" one lives in. Mine will likely be 2.9.

Remember too, there have been good times when some folks in the private sector in certain occupations got whopping annual pay increases while civil service go their usual 2 to 3% regardless of the demand for their particular occupation. What kept them from jumping ship? Perhaps the security & retirement plan?

Private Sector & Govt employment are apples & oranges though.

 

[Independent]

I'm at least partially with MidPack on this one. I'll stick to SS, since federal pensions seem somewhat different.

Social Security is an income transfer program in which current workers help support prior workers. If the economy isn't doing well and wages aren't keeping up with the CPI, then it's easy to see that workers wouldn't want to take increasing shares of their incomes in order to maintain CPI increases for retirees.

I know that retirees (I'm getting close to collecting SS) will say "but the government promised me ___ ". I'd say that the people who are working today weren't even voters when "the government" made that "promise".

I think retirees do have some arguments for getting some support:
1) I took care of my children (and their peers) when they were too young to take care of themselves, now it's okay for them to take care of me.
2) I paid taxes to take care of my parent's generation when I was working, it seems reasonable that my children's generation will pay taxes to take care of me.
3) I helped build the productivity tools that todays workers use. I should get some share of the production.

So I don't have a problem with SS in general. But none of these arguments suggest that workers ought to provide a better deal for retirees than the workers are getting themselves.

BTW, there is currently a legal limit on how far SS will go with COLA adjustments:

Possible limitation on the COLA
Legislation enacted in 1983 may limit the COLA if the combined assets of the Social Security trust funds are below 20 percent of annual expenditures. (This limitation only applies to Social Security; SSI would be unaffected.) Such limitation has not occurred in the past, nor does it affect the current COLA determination. The combined trust fund assets at the beginning of 2008 are estimated to be 359.0 percent of 2008 expenditures.

Latest Cost-of-Living Adjustment

 

[OAG]

Lets see 35 years of paying into SS and MC for most and now retired they also pay, at the lowest level, $96.40 a month for MC Part B. Additionally, approaching a majority of recipients, pay Income Taxes on up to 85% of the benefits and whatever marginal rate is applicable.

With moderate other income (interest/dividends/whatever), whatever the benefit you get, about 25% GOES BACK to the Government in some form of taxes - Maybe to still help pay for those coming after?