COLA Watch

[mickeyd]

A surprising mid-summer decrease in energy prices drove a downturn in the July Consumer Price Index (CPI), the measure used to determine the annual cost of living adjustments (COLAs) for military retired pay, Social Security, and other federal annuities.

On August 15, the Bureau of Labor Statistics announced the July CPI value, indicating that inflation decreased 0.1% from the June figure. That means inflation has risen a cumulative 2.3% for the first 10 months of FY2007.
What does that imply for the 2008 COLA? In the past 30 years, the CPI only decreased twice between June and July (in 2001 and 2004). In both of those years, inflation rose only modestly during August and September.
That's a small sample size and makes for an iffy projection, but if that experience holds true for the next two months of 2007, we’re likely looking at a 2008 COLA in the range of 2.3% to 2.5%.
​

From a recent MOAA email.​

 

[Nords]

IIRC the COLA has beaten the military payraise twice in the last few years.

This year's military payraise looks like it'll come in at 3.5% (with a few exceptions), making next year's work a bit more rewarding than retirement.

Financially anyway.

 

[OAG]

Someplace I saw a Government estimate for the COLA (CPI) for FY 2007 of 2.7%; for 2008 2.8% and for 2009 2.8%. Not sure how valid these estimates will prove to be, but that is what I have incorporated in all of my Excel Spreadsheets that need some CPI number to project income and expenses.

Interesting factoid if one looks at the current (2007) pay chart for my grade at retirement and calculates the current monthly retirement for one of like length of service that person would receive 18% more per month versus what I receive after 28 years of retirement so that should tell you that you will not remain fully compatible through the CPI based COLA's.

Not complaining either because now I just stay home and do what I want to do instead of running around the World doing what others wanted done.

 

[Nords]

Interesting factoid if one looks at the current (2007) pay chart for my grade at retirement and calculates the current monthly retirement for one of like length of service that person would receive 18% more per month versus what I receive after 28 years of retirement so that should tell you that you will not remain fully compatible through the CPI based COLA's.

You missed the fun part in the 1980s where Congress passed the predecessor to REDUX, only to have the entire JCS square off at a hearing and sing in unison (how often does that happen?!?) what was happening to retention.

Congress responded with a commitment to get military pay back in line with the ECI and to target pay increases to retention problems. So I think that 18% isn't so much the failure of COLA as it is a reflection of the "catch-up" raises. A friend of mine retired in 1988 and his O-4 pension isn't too far off mine.

My Jan 2002 pay raise was 5.7% even though I retired five months later. I was pretty embarrassed about it for maybe 10 or even 15 minutes until I thought about all the other pay impositions I'd contended with over the years... so I accepted it as my belated yet just due.

 

[Chris24]

(putting on the Homer voice) .... Hmmmm COLA ... YES! YES ! WHOOPIE !!!!!

 

[OAG]

Nords: Kind of like a mini "bear" market so soon after the July 79 retirement! I just look at it like a 1 grade reduction which I probably earned, but, did not receive, for several "minor" rule violations that went unseen or reported.