Federal pension COLA adjustments...

[friar1610]

...really add up.

I was filing a few papers today and ran across the the first account statement I received when I retired from the Navy in 1996. I compared it to the one I just received and was surprised to see that the gross amount had increased 45% since then. The gross amount is actually slightly higher than my base pay was at the time I retired.

I've said before that I expect COLAs for federal and military pensions (and for SS) to ultimately take some kind of hit in the deficit reduction drills, so maybe I can't look forward to this kind of growth in the future.

 

[freebird5825]

Yes, the COLAs do add up, but so do the health insurance premium increases. Just like when I was w*rking for the fed.

Not complaining, just an observation of the obvious.

 

[Nords]

I've said before that I expect COLAs for federal and military pensions (and for SS) to ultimately take some kind of hit in the deficit reduction drills, so maybe I can't look forward to this kind of growth in the future.

And of course the other problem is that we don't want the type of economy which would produce a huge growth in COLA pensions...

Here's some analysis from Military Times' Tom Philpott back in 2008:
Retired Pay Differences Rise

To assess the effect on retired pay, we asked Defense pay officials to compare current retired for some typical ranks and years of service, officers and enlisted who retired in 1998 versus those who retired this year. The results show newer retirees drawing higher retired pay, with the pay differences ranging from $200 to $300 a month.

Members who retired in 2001 after 20 years were the first group impacted by high-three. They also missed out on the string of above-average pay raises that followed. So an E-8 who retired after 20 in 2001 draws retired pay that is about $400 less a month than a 2008 retiree, and $440 less a month than for an E-8 who retired after 20 way back in 1973.

 

[samclem]

I've said before that I expect COLAs for federal and military pensions (and for SS) to ultimately take some kind of hit in the deficit reduction drills, so maybe I can't look forward to this kind of growth in the future.

But, of course, you haven't had any growth in your pay. The number is bigger, but the value of your pay is the same.

 

[Amethyst]

Military and Federal civilian pay and retirement systems are so different, it's really hard to compare them - like comparing apples and shoes.

That being said, my husband's civil service pension was equivalent to a low-step GS-13 salary when he retired. Now, it's in the GS-11 range. So over the years, he's been effectively "demoted." With no COLA for him and no pay raise for me, 2011 will be the first year our compensations move in lockstep.

Anyway, we realized long ago that we could not rely on our pensions to take care of all our retirement needs. Life is unpredictable and the world takes strange turns, and that applies to retirement systems too.

Amethyst

 

[braumeister]

Well, just for the record, the COLA already took a big hit when they changed the formula to base it only on "core" inflation, which excludes food and energy.

At least in my case, food and gasoline have inflated more than most of my purchases.

That said, yes my military retired pay has certainly increased nicely since I hung it up.

 

[friar1610]

But, of course, you haven't had any growth in your pay. The number is bigger, but the value of your pay is the same.

True, but I'm a happy camper.

 

[friar1610]

At least in my case, food and gasoline have inflated more than most of my purchases.

Given your screen name, I'm surprised you didn't mention the increase in beer prices. That's something I've noticed (along with food and gas.)

That said, yes my military retired pay has certainly increased nicely since I hung it up.

Amen to that.

 

[Bimmerbill]

One of the downsides of retiring early thru my civil service FERS system is the lack of COLA from age 56 to 62. I have a ways to go before 56, so unsure how things will stand when I finally do decide to retire (if the pension is still there...).

My reserve component pension will start in 2026. I wonder where I can go to see how much it went up/down the past few years? From what I understand, my pension will be paid on what an O3 makes in 2026.

 

[Nords]

My reserve component pension will start in 2026. I wonder where I can go to see how much it went up/down the past few years? From what I understand, my pension will be paid on what an O3 makes in 2026.

One way to do it would be to run a pension calculator every year and save a record of the numbers:
https://staynavytools.bol.navy.mil/RetCalc/Default.aspx
https://www.hrc.army.mil/site/Reserve/soldierservices/retirement/retirementcalc.asp?btn=gen

Another way would be to use DFAS' old pay tables to do the calculation manually:
Military Pay Prior Rates
Military Reserve Component Retirement Overview - Military Benefits - Military.com

Pension = pay scale x (#points/360)*2.5% [Apparently a MILSPEC year has only 360 days, but I'm not complaining...]

Not so bad for Final Pay, but calculating the High Three average can get pretty tedious since you'd be hopping around three different years of pay tables for each year's average pay. I tried to automate it a couple years ago with DFAS' pay tables and a spreadsheet lookup but it quickly exceeded my meager Excel skills.

Since you "retired awaiting pay" instead of "resigned", your pension is based on the 2026 O-3 pay table at the max longevity for that rank, regardless of your longevity when you retired. That's currently O-3>14 but perhaps a higher longevity will be in effect then.

When I do these projections for spouse's Reserve pension I [-]hope[/-] assume that pay scale will rise at ECI and that ECI = CPI over the next 11 years, so that it's the same purchasing power in today's dollars. I'd say that's a pretty good assumption for the O-3 rank since it's likely to attract a disproportionate share of targeted pay raises over the next 15 years to improve retention.

One factor I'm not familiar with is how much you can mess with survivor benefits during the gray area years. Spouse and I didn't take out SBP on each other and I haven't studied up on it much... yet.

I've been posting Reserve/National Guard topics last week and this week (and part of next week) starting here:
http://the-military-guide.com/2010/12/01/reserves-and-national-guard/

 

[braumeister]

Given your screen name, I'm surprised you didn't mention the increase in beer prices. That's something I've noticed (along with food and gas.)

True, but much of the beer I enjoy is what I brew at home, and much of the rest is complimentary. Being a beer writer and brewery consultant has lousy pay but some nice fringe benefits.

 

[Bimmerbill]

I sort of see it as maintaining the same buying power it has now. I didn't factor in the targeted pay raises for junior officers tho.

Judging by the number of calls and email I receive from the Reserve recruiters, there must still be a critical shortage of O3s.

 

[friar1610]

True, but much of the beer I enjoy is what I brew at home, and much of the rest is complimentary. Being a beer writer and brewery consultant has lousy pay but some nice fringe benefits.

Dream job!

Are you familiar with any of our Vermont microbrews? Two of my favorite VT companies, Long Trail and Otter Creek recently merged. Not sure if I like that. Sorta like Ben and Jerry selling out to a MegaCorp. Magic Hat (of which I am not a big fan) recently sold to an out-of-state company (don't remember its name.) My favorite is Switchback from Burlington but it's only available on draft (except during the rare occasions they bottle it in big bottles for special occasions.) I stop at the Otter Creek brewery from time to time and bring home a growler of fresh draft beer.

 

[Nords]

Judging by the number of calls and email I receive from the Reserve recruiters, there must still be a critical shortage of O3s.

I know the Navy cut back way too far in the '96 drawdown and hasn't ever really caught up since.

 

[braumeister]

Are you familiar with any of our Vermont microbrews?

You bet! I love New England, and spend time there every year. Vermont, New Hampshire, and Maine all produce some excellent beers.
Although not a brewery, my favorite pub in this country is Ebenezer's in Lovell, Maine. Almost the middle of nowhere, but well worth the trip. Best selection of Belgian beers around.