Is there life after a 1.7 percent COLA?

Don't worry. That mournful sound you're hearing is just federal, military and Social Security retirees reacting to the low cost of living adjustment they'll be ...

The piercing, mournful sound you may hear about this time each October could be millions of venting federal, military and Social Security retirees. It means they’ve just learned how much — or little — they will be getting in January in the form of a cost of living adjustment. In this case its 1.7 percent!

Mid-October is when the federal government announces the result of its efforts to monitor inflation The Consumer Price Index-w measures price changes nationwide for a variety of goods and services. That translates into how much of an inflation-catchup retirees will get, in the form of a COLA, the following January.

The idea is to permit the federal retirees to keep pace with inflation. Many Americans don’t have a pension from their private sector jobs, and of those that do, almost none have any kind of inflation-protection.

But the COLA factor is important for people retired from the federal government, the uniformed military services and those who get Social Security benefits.

Many who get COLAs under the current system argue that it shortchanges retirees by not measuring increases for things they actually need and buy. They advocate using a different CPI measurement to more accurately reflect reality for seniors.

Many on the other side of the COLA argument say the system in use now is in fact too generous. They say it doesn’t take into account the the fact that when prices for an item go up, many people switch to a less expensive substitute: Hamburger when steak prices go up, chicken when hamburger gets too expensive. That’s called the chained CPI. Both the Obama administration and House Republicans have endorsed switching to the chained CPI system. But the realities of politics are that is unlikely, because it would anger the huge number of people getting the nation’s most untouchable benefit, Social Security.

There will be efforts next year to change the COLA procedure. If the past is any guide, there will be lots of noise but no action.

Meantime, retirees need to start thinking about whether rising health premiums and costs next year, and how they will cope with a 1.7 percent increase. The same is true for federal workers who face the same premium increases that they must handle with another 1 percent pay raise.

This year, the retirees got a 1.5 percent COLA in January. Many complain that it didn’t begin to reflect the real increase in prices for things retirees must have: Like medical care.

In January, health insurance premiums on average will go up 3.8 percent for federal workers and retirees. The average means that some plans will go up more, some less. A few will have no increase or will actually reduce premiums. Another good reason to shop carefully during the open season which begins Nov. 10 and runs through Dec. 8.


NEARLY USELESS FACTOID:

By Michael O’Connell

The word “ketchup” is derived from the word for “fish sauce” in the dialect of China’s Fujian province.

Source: Slate


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