2020 retiree COLA: Going up, down or nowhere?

Federal retirees and folks who get Social Security benefits may be among the few people in the country who get anxious when crude oil prices drop, when prices for key items decline or flat line and during those rare periods when inflation turns to deflation. And it happens, not often but on occasion. The indexed-to-inflation retirees didn’t get a cost of living adjustment in 2016, 2011 or 2010 and in 2017 they received only 0.3 percent.

Both groups get cost of living adjustments each January to keep up with inflation as measured by the Bureau of Labor Statistics Consumer Price Index-W. Many critics say the CPI-W is not the best tool for tracking inflation’s impact on retirees because it doesn’t take into account prices for items like medical costs that are more heavily used by older people and retirees. Like it or not,  it is what the government uses to authorize or withhold those January COLAs.

People who get Social Security benefits and former feds who retired under the old Civil Service Retirement System got a 2.8 percent inflation adjustment in December that first showed up in their January checks. Workers retired under the Federal Employees Retirement System, with its diet-COLA system got a 2 percent increase that showed up in January. The amount of the January 2020 COLA, if any, is yet to be determined. The countdown begins with the third quarter of 2019 (July, August and September) and its rise over the previous year CPI-W for the previous third quarter.

Scott Thompson of www.myfederalretirement.com explains, “A COLA effective for December of the current year is equal to the percentage increase (if any) in the average CPI-W for the third quarter of the current year over the average for the third quarter of the last year in which a COLA became effective. If there is an increase, it must be rounded to the nearest tenth of one percent.”

So while they just got a COLA increase in January, and while the countdown is months from beginning, some retirees with long memories don’t like what happened to the CPI-W for November and December last year when the CPI-W hit 245.933 in November and 244.786 in December. That is below the magic number, the CPI-W index for the third quarter of 2018 which was 246.352.

Confused? Welcome to the wonderful world of government indexes. But while the most recent drops in the COLA calculator don’t mean anything, they could if it continues to go down. There is nothing people can do but wait and, if you would rather have a 2020 COLA than little or no inflation, hope for higher gas prices this summer.

Here’s a look back of COLAs for the past decade-plus:Nearly Useless Factoid

By Amelia Brust

The New Zealand government has a “virtual politician” called Sam, which is meant to act and talk like a person, in order to have constructive dialogue with citizens and represent their views using data sourced from policy documents, news stories and more. Sam was created by Swedish software company Touchtech and the Victoria University of Wellington to prepare for the 2020 general elections.

Source: New Zealand government

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.