January COLA forecast: Pray for inflation

Ever watch a dead bird fly?  Or a rock run? Well, if you are hoping for a bigger CSRS or FERS annuity or Social Security check in January, that’s about what you are doing.

Federal, military and Social Security retirees count on  cost-of-living adjustments each year to help put food on the table and pay the rent.  In January, they got a very modest COLA of 1.3 percent increase. Not much, but better than nothing. But could it be that 2015 will turn out to be the good old days in the COLA countdown?

Thanks to lower oil prices, modest consumer spending and other lingering effects of the recession, living costs are flat so far in 2015.  The Consumer Price Index used to track the rise in inflation (and thus trigger retiree COLAs) hasn’t budged from last year.

COLAs for retired feds, military personnel and people getting Social Security, are triggered when the CPI for the current year’s third quarter (July, August, September) rises over the CPI for the previous years’ third quarter.

Cut to the chase: The CPI has been flat, so far, for 2015.  If it goes up this month, in August or September there will be a corresponding (likely very small) COLA in January 2016.  Many experts predict it’s unlikely that inflation will rise enough during this third quarter to trigger a January COLA of any amount.  If there is a raise, it will probably be so small you will be hard-pressed to notice it.

There is some good news. In times of inflation, federal retiree COLAs go up.  But in times of deflation—and it happens—benefits do NOT decline.  That gives a new definition to the term “holding your own.”

Stay tuned.  Maybe there will be war somewhere that will result in an oil shortage or some other national emergency.  That’s about the only “good news” folks hoping for a January COLA are likely to get.

Nearly Useless Factoid:

 By Emily Kopp

The Column of July stands in the center of the Place de la Bastille in Paris, where it commemorates the July Revolution of 1830.  It’s a nice-enough, imposing steel and bronze column. Pretty tame compared with what Napoleon would have put there. He wanted to meld guns and cannons taken from the Spanish into an elephant, complete with water spouting from its trunk. But his empire collapsed before he could see this dream realized.

Source: Paris Walking Tours

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