Return to Article: COLA Wars

By Tammy Flanagan National Institute of Transition Planning September 8, 2006
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    Just curious, what is the rationale for FERS folks not receiving COLAs till they are 62?

    Louise Marshall Posted January 22, 2009 8:13 AM
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    Dear Tammy,

    Thank you, as always, for responding to my questions. I just didn't get the most important of them addressed. I'm not sure if I missed the information in some of the personnel literature and have been looking for it. Perhaps you could help me out?

    The questions are:

    1. Is the COLA for FERS calculated only on the 1 percent?

    2. Are the 1 percent basic FERS funds separated from the matching and participatory TSP contributions during the retirement process and the conversion to an annuity?

    Thanks again.

    Tip off.

    Tip Posted September 12, 2006 1:25 PM
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    This is in response to the comment: Stella's case would be even worse off since under FERS she would not have gotten the same starting basis of $20,000 for the same time in service worked and the salary earned. Additionally, the COLA would only be on her government contributed retirement (that FERS "basic" annuity) of 1 percent.

    Yes, I did make the FERS "Stella" with the same benefit as the CSRS "Stella." In reality, the FERS "Stella" would have had a FERS basic benefit about half as much as the CSRS retiree (2 percent versus 1 percent). But, if she was 62 or older, she would have also been entitled to Social Security retirement, which does receive full COLAs. In addition, she can manage her TSP withdrawals to take less out when she is younger, leaving more for her later years. You're right, it will take more planning!

    Tammy Flanagan Posted September 9, 2006 7:16 PM
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    This entire mess is so reminiscent of "Voodoo Economics." Distinguishing between the 1 percent basic, the 4 percent matching, and our own TSP contributions has truly confounded me. As simple as this article was laid out, it's left me with several questions that I'd appreciate if you (or anyone else out there) could answer for me.

    As always correct me if I'm wrong, but your scenario assumed equal amounts merely for the convenience example. Stella's case would be even worse off since under FERS she would not have gotten the same starting basis of $20,000 for the same time in service worked and the salary earned. Additionally, the COLA would only be on her government contributed retirement (that FERS "basic" annuity) of 1 percent.

    Is that true? Is the COLA for FERS calculated only on the 1 percent? Are the 1 percent basic FERS funds separated from the matching and participatory TSP contributions during the retirement process and the conversion to an annuity?

    Without such information, I couldn't even begin to crunch numbers and attempt to estimate my retirement.

    Once again, thanks for making me think.

    Tip off.

    Tip Posted September 8, 2006 9:24 AM

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