These days good news is hard to come by, but if you are a retiree or close to retirement, there are some changes on the horizon. The Social Security Administration announced the 2018 cost of living adjustment (COLA) would be 2 percent across the board for beneficiaries of social security – the highest increase since 2012. Both federal and civil service retirees receive the said increase and any increase is a blessing for retirement living.
The retirement system you are registered with will determine the change reflected in your monthly annuity. Irrespective of age Civil Service Retirement System (CSRS) retirees will receive a full adjustment. A typical monthly pension for this service is around $3600, resulting in a $72 increase
Federal Employment Retirement Service beneficiaries usually receive an annuity of $1400 would receive a $28 increase. However, they will only avail this increase once they have passed the age of 62.
These adjustments are determined by observing trends in the increase of the premiums in the Federal Employees Health benefits programs, which is estimated to be about 6.8 percent for next year. The second factor that is considered is the increase in the salaries of Federal Employees which is set to increase by 1.9 percent next year.
Why the Sudden Increase?
The retirement increase comes as a direct result of the aftermath of two major natural disasters, Hurricane Irma and Hurricane Harvey, which drove up fuel prices and along with it the Inflation rate.
What do these Increases mean for the quality of retirement living? The good news is that these percentage increases are set to occur for at least the next five years, according to leading financial experts. The bad news is that these gains do not offset the increased cost of healthcare. The simple reason is that COLA uses an index based on the average working American and not a retired one. The formula used to calculate the monthly payments are based on a method that weighs each expense differently. It does not take into account the fact that senior citizens have medical costs at the top of the list of their priorities as opposed to the working population.
A lot of changes in the laws are in the pipeline; the most important of those is the change to formula being used to calculate the monthly pay-out for social security beneficiaries, to one which takes into account a senior citizens lifestyle and expenses.