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2020 COLA and Annuity Projection Calculator Update

Posted By Dennis Damp On In ANNUITIES / ELIGIBILITY,BENEFITS / INSURANCE,ESTATE PLANNING,FINANCE / TIP,RETIREMENT CONCERNS,SURVIVOR INFORMATION | Comments Disabled
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I reported in mid-September that our 2020 COLA [2] was projected to be 1.6% according to Kiplinger’s. They were spot on. The Social Security Administration announced a 1.6% COLA increase on October 10th for 2020. CSRS and FERS annuitants will all receive the full 1.6% this year.  

Request a  Federal Retirement Report [3]  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

2020 Annuity Projection Calculator Update

Everyone planning their retirement needs to know how much they will have to live on in retirement and how much their annuity and the surviving spouse’s benefit will grow over time. Unlike many private sector retirement plans, our annuities are adjusted annually – most years – with a COLA. The 45-year average COLA, from 1975 to through 2020, was 3.68%! Not bad considering so many private company plans provide no annual increase.

I entered a 2019 annuity of $50,000 as an example on the chart and selected an average 2% growth rate. After 10 years the projected annuity with survivor’s benefits grew to $60,949, $5,079 monthly. The survivor’s benefit for CSRS would be $37,082 or $3,090 monthly in this example.  A 2% growth rate increased the annual annuity amount by $10,949 over ten years from 2019 through 2029! Not bad. You can run different scenarios on this spreadsheet based on your personal situation.

Frank Cullen, a retired FAA manager and friend, developed this spreadsheet. He used it when he was retiring to project his annuity and survivor’s benefit for a period of 40 years from the date he retired. Frank updates this spreadsheet for us and with a few minor adjustments you can adapt this to FERS as well. The updated Annuity Calculator [4], version 1.6 dated October 2019, projects your annual and monthly annuity payment with survivor benefit, without survivor benefit, and the projected survivor annuity. The projections are based on your annuity at the time you retire and a selected growth rate (COLA). All COLAs for the past 45 years, back to 1975, are listed on the spreadsheet with the average 2, 3, 5, 10 – and 42-year COLA factors that you can consider for your personal calculation.

I used this spreadsheet when I retired and it proved accurate 10 years into my retirement. The 2% growth rate I used and the projections would have been right on had we not had 2 years without COLAs. The spreadsheet provides insight into how much a survivor’s annuity reduces your monthly benefit and what your spouse can expect to receive when the annuitant dies.

With CSRS a full survivor’s annuity is 55% of the full annuity not 55% of what you were collecting as a couple.  A CSRS full survivor’s annuity costs you just under 10% of your monthly payment however the survivor’s annuity is calculated from the full annuity prior to the survivor’s reduction. Therefore, a CSRS surviving spouse can expect to receive about 61% of what the couple was receiving prior to the annuitant’s death.  Also, if an annuitant’s spouse dies, the annuitant would notify OPM and their annuity would be restored to the full amount that is listed on the spreadsheet. OPM does not refund any prior survivor annuity deductions when an annuitant’s spouse dies.

For FERS employees the projected annuity without a survivor’s benefit will be the same; just enter your annuity estimate, enter your age, year of retirement, what you consider to be a realistic growth rate, and the spreadsheet will calculate your annuity for the next 40 years! The column reserved for your projected annuity with survivor benefits will be slightly lower since the maximum spousal benefit is 50% for FERS, not the 55% for CSRS. Also, the full FERS annuity will cost the retiree a little more because FERS employees pay 10% of their annuity for a full survivor’s benefit where CSRS pay just under 10%. FERS COLAs are adjusted down [2] when the COLA exceeds 2%.

To determine what your initial retirement annuity will be request estimates from Human Resources for several target retirement dates. I requested at least a half dozen estimates two years before I retired. You can also calculate your estimated FERS annuity [5] or CSRS annuity [6] using the formulas we have available on our site.

All you need to do is enter the appropriate values in the four highlighted cells.  The spreadsheet will do the rest for you.  The spreadsheet is locked except for the 4 highlighted entry cells.  This is to ensure that formulas are not inadvertently altered.  The form’s password is provided on the spreadsheet so those familiar with Excel can adapt the spreadsheet as desired.

Scheduling A Retirement Benefits Seminar

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefits briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics.

Schedule A Seminar in Your Area [7]

Benefits Administration Letter 11-104 requires agencies to educate employees on how to plan for retirement. FEBA assists Federal agencies to comply with this directive. HR departments can Contact FEBA to schedule briefings for their area.

Helpful Retirement Planning Tools / Resources

Request a  Federal Retirement Report™ [8]  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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