Another No-Cal COLA for Retirees?

One in every six Americans gets a federal, military or Social Security retirement benefit that is linked to inflation. But what happens when their isn\'t any in...

Retirees who equate inflation-catch-up-adjustments with good news will be sorry with the latest numbers from the Bureau of Labor Statistics.

This is big news considering one in every six Americans either gets a federal civil service annuity, military retired pay or Social Security benefits.

According to the BLS, the rise in April living costs was so slight that retirees, after several months when living costs actually dropped, probably won’t get a cost of living adjustment in January, 2011.

Thanks to deflation during the cost of living countdown period between 2008 and 2009, retirees did not get a COLA in January of this year. That was shocker after the 5.8 percent COLA they got in January, 2009 thanks to a ripple effect that higher oil prices had on most aspects of the economy.

COLAs for federal retirees, military retirees and people who get Social Security benefits are linked inflation, as measured by the BLS. January COLAs are triggered by the increase in a Consumer Price Index from the current third quarter (July, August, September) over the previous year third quarter. It’s a one way street in that retiree annuities can go up because of inflation, but cannot be reduced when there is deflation.

Many retirees appreciate being on steady annuities during a time of deflation when prices for many things actually decrease. But others say the BLS sample “market basket” of goods and services doesn’t include many things important to retirees. Or they point to increase in health premiums with or without a COLA.

Bottom line: Barring a major jump in inflation between now and the end of September, it is unlikely retirees will get a COLA next January.

If you really want to get down in the weeds to see how the complex process works, here’s how the National Active and Retired Federal Employees explains it to its members: April Prices Increase

For the complete picture from the BLS, click here.

Financial Checkup

Today (10 a.m. EDT) For Your Benefit radio show host Bob Leins will be talking with financial planner Karen Schaeffer about the federal TSP and what you should and should not be doing during this period of stock market ups and downs.

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