Retirees Eye 3.5 Percent Raise!

With 4-months to go in the cost of living adjustment countdown, Senior Correspondent Mike Causey reports federal, military and Social Security retirees are in l...

Things are looking up, at long last, for retirees.

With long-dormant inflation suddenly on the rise, federal, military and Social Security retirees are looking at a possible January cost of living adjustment of 3.5 percent. And if living costs continue to climb, the raise could be even bigger.

With 4-months left to go in the COLA countdown the retirees, who include one in every six Americans, are in line for the first inflation-adjustment in two years.

The last time the huge group of retirees got a raise was the 5.8 percent COLA they received in January, 2009. Since that time, insurance premiums for federal workers and retirees have gone up dramatically as have certain Medicare premiums.

Bottom line: The retirees want and need the money.

The amount of the COLA won’t be known and official until mid-October when the Consumer Price Index-W for the third quarter of this year (July, August, September) is announced. COLAs for retirees are normally based in the increase of the current year’s CPI over the CPI level of the previous year. But since the cost of living actually dropped between 2008 and 2009, the base for computing the 2012 COLA is the CPI level for the third quarter of the year 2008, not 2009. (If you are confused, welcome to the club!)

If the CPI increases over the next three-plus months, the January, 2012 COLA will be larger. If it drops, the increase will be less than the current (tentative) 3.5 percent level. But if living costs dropped dramatically, like the deflation we had in 2008 and 2009, retiree benefits would not be reduced. They are adjusted for inflation but not for deflation.

If the 3.5 percent amount were to remain steady, workers retired under the old Civil Service Retirement System or the CSRS-Offset system would get the full 3.5 percent regardless of their age. The vast majority of retirees are under CSRS. So would individuals who get military retired pay and people who are getting Social Security benefits.

For most workers retired under the Federal Employee Retirement System (FERS), the inflation-adjustment would be 2.5 percent, and it would only go to individuals who are 62 or older.

If you love detail and like to crunch the numbers for yourself, click here.

But if you find a mistake, don’t blame us. Take it to a higher authority. Contact the Bureau of Labor Statistics. And lotsa luck!

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