Projecting Your COLA

September 9, 2016

As we get down to the last few months of the fiscal year, a frequent inquiry from MOAA members is, “What do you think the COLA will be?”

Anybody can make a guess, and say it's probably not going to be much.

MOAA's reaction is, “Let's make as scientific a guess as we can.”

The best indicator (and about the only indicator) we have for inflation in the next few months is what happened in the last few months of previous years.

And what happened wasn't too good.

Here's the average monthly change for July, August, and September for the last three years (these are raw changes in the consumer price index (CPI), not percentage changes): zero, -.2, -.1.

What does that mean?

If the CPI follows the recent August-September average this year, your COLA will be: .2 percent.

In that case, you'd get an extra $1.66 per month for every $10,000 in annual retired pay, Social Security, VA disability compensation, or SBP annuity - before taxes.

Don't spend it all in one place.

And that's the good news.

If you're a pessimist, you'll remember the last time we had a year with no COLA, we ended up having a second consecutive year without a COLA (2010-11).

Further, this year's actual July change wasn't zero (the average for the last three Julys); it was -.5.

If that worse-deflation-than-average continues in August and September, we'll have another year with no COLA.

The August CPI number, which will be critical in determining your 2017 COLA, comes out next week. We'll have the news - good or bad - in next week's legislative update.

 

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