Deferred FERS Pension Question

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NomDeER

Recycles dryer sheets
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I have a deferred FERS pension that I will start to receive in ten years. My understanding is that there is some version of a COLA, but it doesn't start until I begin receiving the pension.

My question is about how I take this into account when running FIRECALC. Do I check the box that says "inflation adj.?" Or will that screw things up since there is no adjustment for the next ten years and because it's not quite correlated with inflation? Is there a way to account for this in my FIRECALC calculations?

Thanks in advance for any insight.
 
FERS has a COLA starting at age 62, when SS eligible. I'm not sure about Firecalc, I couldn't figure out how to split it to reflect No Cola followed by COLA--it didn't make any difference excluding the inflation adjustment for me. If your annuity starts at age 62, you can enter the amount starting in a specific year. There was another calculator that had more flexibility in starting and stopping income streams.

Historical COLA for Feds: Federal Retiree COLA History: CSRS COLA and FERS COLA
CSRS is same as Social Security COLA, but FERS is up to 1% less for any COLA >2%
 
FERS provides a "diet" COLA starting at age 62. Lately it has been the same as Social Security but in times of higher inflation it will fall as much as 1% behind CPI. This is the basic approach from OPM's website:

"For Federal Employees Retirement System (FERS) or FERS Special benefits, if the increase in the CPI is 2 percent or less, the Cost-of-Living Adjustment (COLA) is equal to the CPI increase. If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent. If the CPI increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar."
 
I wouldn't worry too much about that COLA part might be going away.
 
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Yes indeed, don't count on federal retirement benefits to remain unchanged. There was a recent Washington Post article outlining what the administration is proposing for federal retirees and one proposal is to take away the FERS COLA since, as explained in the article, people covered under that system will still get Social Security COLAs. They are also proposing other cuts so you'd do well to max out your TSP and other savings to ensure your financial future is secure, if possible.
 
I doubt the OP has to worry about prospective changes on a FERS pension he has already earned. The Hill may very well tamper with what happens to what employees can earn in the future but they won't drastically cut already earned COLAs. That would be about as likely as that they would eliminate earned COLAs from social security. Sure, they might make what they could mislabel as a "fairness/accuracy" tweak like switching to chained CPI so they can log some revenue increases out over ten years but nothing drastic like dropping COLAs entirely.
 
You might want to read the news again. Current FERS pension is affected. No COLA. Sure nothing is passed yet, but that's what being proposed.
 
I read it also about a proposed no COLA for FERS. Our annuity is separate from SS. All of this has to go through Congress and who knows what may happen. I am FERS.
 
I wouldn't be to sure of anything in this environment....Feds don't have many friends with the current political configuration in the WH, House and Senate. Of course, it is early innings....
 
donheff said:
FERS provides a "diet" COLA starting at age 62. Lately it has been the same as Social Security but in times of higher inflation it will fall as much as 1% behind CPI. This is the basic approach from OPM's website:

"For Federal Employees Retirement System (FERS) or FERS Special benefits, if the increase in the CPI is 2 percent or less, the Cost-of-Living Adjustment (COLA) is equal to the CPI increase. If the CPI increase is more than 2 percent but no more than 3 percent, the Cost-of-Living Adjustment is 2 percent. If the CPI increase is more than 3 percent, the adjustment is 1 percent less than the CPI increase. The new amount is rounded down to the next whole dollar."
Click to expand...

Is there any way to take this into account with FIRECALC?

Fedup said:
You might want to read the news again. Current FERS pension is affected. No COLA. Sure nothing is passed yet, but that's what being proposed.
Click to expand...

The news seems to be that the White House's budget is DOA. We really have no way of knowing what is going to happen. If I were a gambler -- and I'm not -- I would guess that any changes will only be for new employees, like what they did when they increased the amount of the employee's FERS contribution.

phil56 said:
I wouldn't be to sure of anything in this environment....Feds don't have many friends with the current political configuration in the WH, House and Senate. Of course, it is early innings....
Click to expand...

But almost all of the Congressional staffers are on FERS, right? Maybe they'll have some influence?
 
Hill staff are on FERS and have a vested interest in all is but remember that they, members of Congress, and a few others like those in the Intel community get a higher multiplier for each year of service. That said, most Hill staff don't stick around long enough or get paid well enough for it to matter much. Those who make policy are at the staff director level and take their marching orders from the leadership and members. I am, of course, hopeful that cooler heads will prevail but in the mean time I recommend reading Joe Davidson's article in the Washington Post about this topic.
https://www.washingtonpost.com/news...hits-on-federal-employee-retirement-programs/
 
Do members of Congress have to be there 5 years to get any pension, I mean like the rest of Federal employees. I'm wondering because they change every 4 years.
 
I have always specified that my FERS pension is not COLA'd, when running FIRECalc, because it really doesn't have a full COLA.

If it was me, I'd just put the amount in, say that it is non COLA'd, and specify the date when it is to begin.
 
Fedup said:
Do members of Congress have to be there 5 years to get any pension, I mean like the rest of Federal employees. I'm wondering because they change every 4 years.
Click to expand...

They are elected every two years or six years. Many of them stay for repeat terms. Apparently, members and their Congressional staff not only get FERS, but get a factor of 1.7 times their high three as long as they've worked 5 years. That's a better multiple than most federal employees have.

https://www.opm.gov/retirement-services/fers-information/computation/

W2R said:
I have always specified that my FERS pension is not COLA'd, when running FIRECalc, because it really doesn't have a full COLA.

If it was me, I'd just put the amount in, say that it is non COLA'd, and specify the date when it is to begin.
Click to expand...

Ok. Thanks. That's probably a good way to come up with a conservative estimate. And if they do remove the semi-COLA then it won't adversely affect my plans.
 
One way to approximately model your situation is to calculate what your pension would be worth at age 62 in today's dollars, assuming say 3% inflation. Then you can enter that as your pension and click the inflation adjust button.
 
Fedup said:
You might want to read the news again. Current FERS pension is affected. No COLA. Sure nothing is passed yet, but that's what being proposed.
Click to expand...
I read that provision as applying to FERS and CSRS employees, not retirees - in other words prospective not retroactive. But I could be wrong and my ox might be proposed to get gored. :( I'm not loosing sleep over it. I doubt that the Hill will enact a provision that whacks earned benefits substantially, especially since that would impact themselves and their peers. Most Senators put in substantial careers and end up with decent Federal pensions. They also get Social Security whether they stay in office or not so look for tweaks like chained CPI and maybe some prospective cuts, not big slashes to earned benefits there as well.

Edit: Just read a better description of the proposal and it does gore my ox. Still not loosing sleep.
 
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The fedweek article explaining the proposed changes did state the COLA removal would affect both current and future FERS retirees. I also have doubts that it will get passed as currently written. A couple of other proposed changes that could affect future FERS retirees is using your high-5 salary instead of high-3 when calculating your pension and eliminating the social security supplement some get if retiring before 62.
 
I think last time they made a change on employee's contribution for new employees, they rolled it back. IIRC.
 
SS and the FERS annuity have nothing to do with each other. They are two different entities in which we participated. They are not connected in any way. I do not understand Mulvaney's reasoning behind cutting COLA for FERS just because we get SS. The COLA is one percent less that the CPI already and not a full COLA. After about 20 years with inflation...the annuity will be worth about 50% less than the original worth. I am writing my Senator and Representative.
 
MikeWillRetire said:
One way to approximately model your situation is to calculate what your pension would be worth at age 62 in today's dollars, assuming say 3% inflation. Then you can enter that as your pension and click the inflation adjust button.
Click to expand...

Good idea. Thanks! If I want to be more conservative, I'll just leave out the inflation adjustment.
 
phil56 said:
Yes indeed, don't count on federal retirement benefits to remain unchanged. There was a recent Washington Post article outlining what the administration is proposing for federal retirees and one proposal is to take away the FERS COLA since, as explained in the article, people covered under that system will still get Social Security COLAs. They are also proposing other cuts so you'd do well to max out your TSP and other savings to ensure your financial future is secure, if possible.
Click to expand...
Do you by any chance have a link to this article?
 
diet cola

After doing the math, my analysis indicates the current FERS diet cola would have resulted in an average loss of 0.54%/year of a FERS pension for the historical time period from 1914-2015. Those losses add up such that you could expect the pension to be worth ~85% of its initial value after 30 years (much more loss of course would be incurred if retiring before age 62 when no cola is given). However, the "diet" cola might be especially important if we were to have a period of years like the 1970's with very high inflation. FWIW, the organization NARFE estimates that removing the "diet" cola would cost the average FERS retiree about $246,000 over a 30 y retirement. That seems grossly unfair to anyone near retirement who has worked and contributed to the system for a long time. I know I would have made other work/retirement planning choices along the way.
 
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