COLA Boost is Hovering Around 1.8 Percent Now

Byjeng / Shutterstock.com

Federal and military retirees might have noticed a slight dip in 2015 cost-of-living adjustment calculations, based on the latest data from the Labor Department.

The exact cost-of-living adjustment for next year won’t be known until October when all the numbers are in, but plugging into the formula the latest available data results in a 1.8 percent increase, down a bit from the 1.9 percent estimate based on June statistics. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) fell 0.1 percent in July, after increasing in May and June. The CPI-W measures price changes in food, housing, gas and other goods and services; the annual COLA for retirees is based on CPI-W data.

The average of the July, August and September 2014 consumer price numbers, along with the average figure from the third quarter of 2013, will be used to calculate the 2015 COLA. The annual COLAs are based on the percentage increase (if any) in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (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.

The Bureau of Labor Statistics will release the August 2014 numbers on Sept. 17.

Even with the slight decrease in July, federal and military retirees, as well as Social Security beneficiaries and those receiving veterans’ benefits, are on track to receive a larger COLA than the 1.5 percent bump they got in 2014. Retirees received a 1.7 percent increase for 2013, and a 3.6 percent boost for 2012. The 2012 COLA increase was the first since October 2008 (which took effect in 2009).

Federal employees, who do not receive COLAs, are on track to receive a 1 percent pay raise next year, the same as in 2014.

According to the formula, if the full COLA increase is 3 percent or higher, as it was for 2012, then retirees under the Federal Employees Retirement System receive 1 percent less than the full increase. So FERS retirees received a 2.6 percent bump for 2012. If the COLA falls between 2 percent and 3 percent, then FERS retirees would receive 2 percent. If the increase is less than 2 percent, as it was in 2014, FERS retirees receive the same as retirees under the Civil Service Retirement System; this year, it was a 1.5 percent boost.

(Image via Byjeng / Shutterstock.com)

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