Do you really want a double-digit COLA?

Federal-military-Social Security retirees are hoping for a January 2020 cost of living adjustment. While the exact amount won’t be known until early October, the catch-up-with-inflation COLA is likely to be in the 1.6% range.

Nice, but not good enough for some who remember the good-old-days when anything short of 8% or 9% was a disappointment. After all, bigger is always better, right?

Not necessarily.

This year, Civil Service Retirement System-Social Security-military retirees got a 2.8% COLA while eligible retirees under the Federal Employees Retirement System got 2%. Many remember the “bad” years like 2016 when the COLA was only 0.3%, or 2015, 2010 and 2009 when it was zero. Those are a far cry from the “good old days” when retirees routinely got increases of 6%, 7% and 8% each year. Then there was that happening time, in April 1948, when civil service retirees got a 25% catch-up to make up for adjustments they didn’t get because the nation was involved in World War II. Those were also years of gasoline shortages, rules and rationing — and very high inflation, when mortgage rates were in the teens, thus making it difficult-to-impossible to buy a home.

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Good old days are often filled by some very, very rough patches.

All of the above is meant to introduce the following, written by the general counsel of a major federal agency. His message to current and future retirees yearning for a big COLA is “be-careful-what-you-want because you may get it”:

“I have one of these stupid-question days going. Why do people worry about COLAs? I mean, what is there to get excited about or depressed about? The government has certain economic indicators. If those indicators go up, there is a COLA awarded to cover at least part of the costs associated with those indicators. The COLA will probably never cover all of the increases in cost during the year for some people. But for other people who are watching particular costs the COLA payment might pay all the increased costs.

“For example the subsistence person in Alaska living off the land is thrilled to get an increase when his only expenses in life are bullets and fuel. The person may not have any medical costs because they use Medicare. On the other hand, a person in a large city might see all kinds of costs increase that are not fully covered by the COLA increase.

“But why worry about the COLA? If costs go up, you received an adjustment to your COLA. If costs stay the same we don’t get an adjustment to COLA. I get the feeling that some people would love to get a COLA even when costs stay the same or they want to get a huge COLA that exceeds the increased cost of consumer products. Either way, a COLA is an adjustment made to represent an estimate of inflation. I just don’t get all the worry. You will receive the appropriate amount of COLA when all the numbers are collected.

“Now, I do worry about one thing. Certain people have recommended the diet COLA formula should be used in future years. These people say the diet COLA would save the government billions of dollars in the decades to come. But we all need to realize something: All math and money equations have to balance when you are done with the math. So for every $1 billion you save for the general Treasury of the United States, someone is losing $1 billion. I can quite happily acknowledge perhaps that the government needs to use the diet COLA if it is the right decision.

“But let’s not just talk about the savings to the government. Let’s all confront the issue that many people on pensions, Social Security, etc., will be losing those billions of dollars to help balance the equation. If we put money into the Treasury, it has to be justified or balanced by taking that same amount of money away from Social Security, etc. I laugh out loud when I hear proponents of the diet COLA say it will save the government billions while costing pensioners very little. The cost to pensioners has to equal the savings to the government of billions of dollars. Of course those opposing the diet COLA all say how it will cause starvation for Social Security recipients and they ignore the need to balance the budget.

“On a different topic, I personally think that Social Security should consider taxing all wages. Right now individuals stop paying Social Security payroll taxes at $128,400. I think they should tax you without regard to any cap. I also am more worried that a day will come when Social Security is not paid to seniors if their income in retirement exceeds some cap. That may mean that those of us who are Thrift Savings Plan millionaires and have substantial pensions would be excluded from any Social Security payments. I would hate to have that happen because I feel I have earned those payments and have relied on those predicted amounts in planning my retirement. But these difficult decision may be necessary to keep Social Security solvent.

“But we can’t worry about what hasn’t happened yet. And we shouldn’t really be too worried about COLA since if there is inflation, the COLA is supposed to offset it; and if there is no inflation then we don’t need a COLA adjustment.”

Nearly Useless Factoid

By Amelia Brust

In 2012, British artist and engineer David Cramner turned a taxidermied badger into a working theremin, a musical instrument patented in the 1920s that makes sounds by waving one’s hand between two metal antennas. The result was the Badgermin, which was sold and used in a recording studio.

Source: Nervous Squirrel

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