After two years without a cost-of-living adjustment, federal/military/Social Security retirees can’t be blamed for wanting a little inflation. At least enough to nudge the Consumer Price Index to give them a little something more in their January 2017 annuity payments.

The pay raise for white collar workers is looking good. The President proposed a 1.6 percent adjustment and Congress has done nothing and said nothing about it. A case where silence really does equal consent. So the raise is on, barring some major political flap later this year. But the retiree COLA is a different thing and a very different process. Pay raises are political/fiscal decisions that have nothing to do with reality. Feds have never, ever gotten the annual pay raises promised them by the bipartisan 1990 Federal Employee Pay Comparability Act (FEPCA). Presidents Clinton, Bush and Obama have shaved the catch-up raises due feds all these years.

Retirees are linked to increases in the cost of living as measured by the CPI. If it goes up, so do their benefits. If there is deflation, which we’ve had from time to time, annuities do not go down. But it’s been two years since people whose benefits are linked to inflation have gotten a COLA. Retiree COLAs are supposed to be based on the rise in the CPI from the third quarter of the current year (that would be July, August and September 2016) over the third quarter of the previous year. But inflation has been so low for so long that the 2017 COLA (if there is one) will be based on any rise in living costs over the third quarter of 2014, not 2015. And it seems like it’s been so long since retirees have had a COLA that any adjustment retirees get will depend on the rise in living costs from the third quarter of this year (2016) over the CPI for the third quarter in 2014.

Inflation inched up slightly, enough, if it holds, to give retirees a tiny COLA in January. But it must stay up for the next four months for that to happen. I asked a long-time COLA watcher and expert on the federal retirement system his thoughts. This is as good as he could do: “My guess is there will be one, but only because I can’t believe there could be two years in a row without some inflation.” So is that a prediction or a prayer?

Bottom line: Don’t spend it yet.

Nearly Useless Factoid

By Michael O’Connell

Bela Lugosi’s appearance in “Abbott and Costello Meet Frankenstein” (1948) would be only the second time he appeared as Dracula on screen. It would also be his last time to do so.

Source: IMDB

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