What goes up must come down, right?

Generally speaking that is true with one major exception: the inflation-indexed benefits that are adjusted each January for federal-military and Social Security retirees.

They get annual Cost of Living Adjustments (COLAs) to protect them from inflation. Unlike most private sector pension benefits, which are fixed in stone at retirement, retired feds get annual COLAs.

For the vast majority of retired feds, who are under the Civil Service Retirement System, the January 2009 COLA will be 5.8 percent (it will be 4.8 percent for those under the FERS retirement plan.) That’s official. It is the largest COLA since 1982 and reflects the rise in living costs, triggered by higher oil prices, in mid-2008.

For the last two months living costs have dropped dramatically. This has people, who earlier were worried about inflation, now really worried about deflation. So, does a reversal in the cost of living mean it is possible that the 2010 retiree raise could be zero? Answer: Yes, if living costs continue to drop or remain at current levels, it is possible that retirees would not get a January 2010 COLA.

But the more important question is what about a cut in federal retirement or Social Security benefits? If deflation continues will federal pension benefits be cut accordingly? Answer: NO!

It is theoretically possible that there would be no COLA increase for retirees, but there is no provision for cutting benefits if there is a decline in the cost of living.

Living costs dropped last month for the second month in a row. That has many people worried about the possibility of deflation (which is what happened during the Great Depression), which could threaten millions more jobs in manufacturing and lead to an increase in unemployment. People without jobs don’t buy much!

But in a time of extended deflation (if it comes to that) federal-military-Social Security retirees are in good shape. Certainly better than their neighbors who don’t have pensions, or have benefits that flatten and don’t increase along with living costs.

COLA Reassurance

Here’s what the National Active and Retired Federal Employees Association is telling its members in its most recent legislative/COLA update:

On December 16th, the Bureau of Labor Statistics (www.bls.gov/cpi or 202/691-6994) reported November’s CPI-W is 207.296, a decrease of 2.3 percent from October’s 212.182. November’s index is 3.8 percent lower than the 2008 third quarter average base index of 215.5. Lest anyone fear a possible decrease in their annuity as the result of a negative COLA, members should know that the law DOES NOT provide a reduction in benefits in the event of deflation over the fiscal year measuring period ending in September 2009.

        Read more: Mike Causey

Nearly Useless Factoid

According to MentalFloss’s 10 People with the Most Square Miles of the Earth’s Surface Named After Them, number three on that list is Norwegian Queen Maud. When you total up Queen Maud Land and the Queen Maud Mountains in Antarctica, and the Queen Maud Gulf in Canada, land named for her covers 1,102,000 square miles. “Compromisin’, enterprisin’, anything but tranquilizing, Right on Maud!”

To reach me: mcausey@federalnewsradio.com

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