Posted on Saturday, 7th March 2015 by

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The impact that our Cost Of Living Adjustment (COLA) has on our annuity is significant and without it retirees would find themselves doing with less as they age. Even though our COLAs don’t truly keep up with inflation as claimed we at least experience increases most years. If COLAs would have been paid in 2010 and 2011, like most years, our annuities would have been several percentage points higher today.

Since I retired on December 31, 2004 my annuity has increased over 20% for an average increase of just over 2% a year during this period. Social Security reports that in 2005 the Average Wage was $35,448 and in 2014 wages increased to $44,888 and this mirrors our COLA increases.

When I was discussing retirement with one of my uncles years ago he warned me about how his corporate annuity hadn’t increased in 20 plus years. My uncle worked in the banking industry and when he retired the annuity he received from his employer he thought generous. Over 20 years later, without any cost of living increases, they were struggling to keep up with the high cost of everything. Fortunately they received Social Security which did increase each year. Without COLAs we too would see our annuity’s buying power shrink dramatically in a few short years.

My mother was born in 1914 and she told me that during the 1930s they could buy a complete meal at a restaurant including drinks for 35 cents! You can’t buy a cup of coffee for that today. Even at those prices my mother couldn’t afford to eat out. She was forced to quit school after sixth grade, along with her 5 sisters, and shortly thereafter went to work. Her first job paid $2.00 a week working 6 days a week as a maid for a couple in Pittsburgh. She and all of her sisters had to send most of their pay home to their father!

We visited an antique store back in the 1970s and I picked up a copy of LIFE magazine for my birth month, May 1949. LIFE magazine was one of the premier publications back then and it was huge, 14 by 10 1/2 inches and a half inch thick. The ads are fascinating to read; GE radios starting at $19.95, console black and white TVs from $395 to $985, Lane Cedar Hope Chests for $49.95, razor with 10 blades in a case for 98 cents, watches for $2.50 to $4.95, TUMS 10 cents a pack, cameras $9.98, and they advertised dog food at as low as 8 cents a day.

Some of the items on this 1949 list seem to contradict the premise that everything goes up over time. Today you can buy a 48 inch flat screen TV at Wal-Mart for $388 and we purchased a 60 inch SONY smart TV recently for under a $1,000. All well within the range of what you could buy black and white consoles for in 1949! TVs were just coming into the market and they were a luxury back then, very few homes, less than 1 %, had them. Here is a list of what things cost in 1949; compare them to today:

  • Average annual salary: $3,600
  • Average cost of a car: $1,650
  • Gas: 26 Cents a gallon
  • Average home: $14,500
  • Bread: 14 cents
  • Postage stamp: 3 cents
  • The DOW reached 200!

Hopefully our COLAs will continue to provide the cushion everyone on a fixed income needs, more buying power as costs increase. Fortunately we also have the THRIFT plan to help grow our retirement funds. The L Income fund offers some growth while protecting most of your nest egg in the G Fund which is guaranteed never to decrease in value.

The 2016 COLA may be lower than the 1.7% we received this year if trends continue. The October and November 2014 CPI-W figures were lower than the previous three month period. If the CPI-W continues to decrease our COLA will follow suit. Many factors contribute to the CPI-W. For example, wall street is contemplating that the Federal Reserve will raise interest rates soon due to a heated up economy that can lead to inflation. That would be good news for the 2016 COLA.

It’s too early to determine the actual impact and the trend could change for any number of reasons as we progress through the year. Because 2016 is a presidential election year my gut feeling is that we will receive a COLA, it just may not be as much as we would like or deserve.


We are in the process of totally redesigning and upgrading our Federal Employees Retirement Planning web site. If you visit later this month don’t be surprised when you find a new and updated format. The new site is designed to display perfectly in all media from desk top computer, iPad, and tables to smart phones. Over 50% of all site traffic now comes from mobile devices.

The new site will be much easier to read and navigate and we are also reviewing and updating content as we go along. Visit later this month to check out the new format and functionality. Let us know what you think and your input is always welcomed. We use visitor submitted comments to keep our site up-to-date and focused on the true needs of our site users.

We are still looking for a retired federal annuitant with an extensive background in HR and federal benefits to host our Benefits and HR Forum. If you are retired, enjoy writing about things that matter to federal employees and annuitants, would like to stay active and involved after leaving federal service, send an email to and include your phone number. The person selected would also review and provide updates for our website.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and financial information are subject to change. To ensure the accuracy of this information, contact relevant parties and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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