Will COLA suffice come retirement?

Just because you are guaranteed a pension as a federal worker does not mean it will truly keep up with the cost of living when you retire.

Retired federal workers will get a 1.7 percent cost-of-living adjustment (COLA) to their civil service annuities in 2015, the government recently announced. This slight rise in COLA will also be applied to Social Security benefits and military retirement annuities.

In 2014, the COLA increase was 1.5 percent; in 2013, it was 1.7 percent. That’s a $1.70 more for every $100 — arguably a pittance for retirees of the federal workforce who are contending with the rising costs of living, which is out of our control.

No doubt like us you know that 1.7 percent is more than likely not keeping pace with the true cost of living increases in the U.S. even if you put aside other inflationary pressures and the value of the U.S. dollar, which is subject to constant changes in buying power and forced devaluation.

What does this all mean to you — an employed federal government worker who is dutifully making your pension contribution and tossing some money aside in your Thrift Savings Plan?

This is why it matters: more than likely you are not going to be given a break or huge injection of free cash from the federal government after you finally decide you’ve put in enough federal service to safely retire.

Unless the U.S. economy and government becomes radically flush with cash, your COLA will probably amount to no more than 2 percent. Meanwhile, what you pay to live today won’t be what you pay to live tomorrow.

Because of inflation, that $200 grocery order could become a $250 grocery order. That $200 electric bill could be a $280 electric bill in 2055. These expenses and others will continue to rise after you retire. And you will be making a fraction of the salary you made when you were an active member of the federal workforce.

We are not trying to use fear to get your attention. But hopefully we have gotten your attention because this is not fear, this is reality.

Your retirement plan needs go beyond the federal program of pension contributions, TSP investments, and savings. It needs to consider the cost expectations of the future. It needs to balance those projected cost demands against whether your retirement income will outpace it so you can potentially maintain the quality of life you have as a full-time, employed federal worker.

We can help you see this big picture. We can guide you to other investment instruments so that you are better prepared for retirement.

At any time, forces larger than us, forces that we can’t control, can undercut our financial outlook and our ideal retirement scenarios. Our benefit specialists will help you overcome these challenges.

Contact a benefit specialist today.