The UnCola

Source: adslogans.co.uk
Source: adslogans.co.uk

As I head into year two of my early retirement neither economically bloodied nor sitting in an extravagant lap of luxury, I am nonetheless cognizant of some financial milestones that are anticipated over the next few months. Isn’t it interesting that no matter how old we get, autumn is still the beginning of everything essential?

Most important of the upcoming milestones is a supplemental that will be added to my monthly retirement annuity. Known as the FERS Supplement, it acts as a bridge to Social Security payments that begin at age 62. Should I decide not to start Social Security at that point (and there are very good reasons to hold off), the Supplemental will nevertheless end as soon as I hit that all important age. I will then have to decide whether to begin taking distributions from my 401(k), have my wife commence her Social Security payments, or perhaps doing nothing and simply wait a bit longer.

In the last year I’ve been receiving only my base annuity amount. It’s been Gorgeous’ income that has allowed us to live without touching any of our tax-sheltered savings. While I am hopeful that she will continue working for another ten years, it is also inevitable she’ll want to cut back on her hours and not work the full days that she currently is. Although I’ve asked her several times already to tell me what she sees of our financial future, alas that’s an answer for which only paying clients of hers can receive. Husbands of psychics receive no direct clairvoyant benefits. I have to guess just like any other schmuck.

For the life of me, I have no earthy understanding how she uses these things.
For the life of me, I have no earthy idea how she uses these things.

Another economic milestone ahead of me is the agreed-upon increase in alimony that my ex-wife will receive. The timing of this increase is set to coincide with my collecting the annuity supplement. As attorneys are prone to say, there are no accidents. Still, I repeat my oft-stated mantra that if you’re a single male with a bank balance and a pulse, please contact me. Have I got an available girl for you!

There is also the matter of the annual cost of living allowance (COLA) which gives Social Security recipients, federal retirees, and service workers at least a semblance of keeping steady with inflation each year. For so many of the elderly, it is the only buffer against increases for the premiums of Medicare Part B coverage.

But unfortunately for only the third time 40 years, the Social Security Administration will not be increasing these payments. I was assured by former co-workers who took the retirement plunge ahead of me that I could look forward to these yearly “raises.” Here it is my first year out, and I am instead drinking the UnCola.

Better make it a Seven and Seven, bartender.

http://marathondater.blogspot.com/2012/02/radio-date.html
Source: marathondater.blogspot.com

According to the Washington Post, the reason for the absence of any COLA is because the formulations for it are tied to something called the consumer price index (CPI). The CPI is based on the Department of Labor’s current estimate of inflation. So in spite of medical costs increasing over the last year, other consumer price categories such as food and housing have not risen enough to trigger a COLA increase. Those Labor Department number-crunchers apparently must not shop at my local grocery store.

Specifically, one of the principle measures for the current slope of the CPI has been fuel prices. Like most of you, I have been leading a cheer all summer as gas flirted with the sub-$2.00 per gallon range. Shall we splurge on that one-hour-plus drive down to West Palm Beach for goodies at Trader Joe’s? Absolutely, gas is cheap! And apparently so is food!

Oh, the tangled web. Where is Al Gore and that lock box of his anyway?

Stolen from the Washington Post
Stolen from the Washington Post

The main problem in using the CPI to measure Social Security benefits is that it is primarily based on how working people spend their money, not those who are retired. Advocates such as the AARP and NARFE are instead suggesting the creation of a new index, one called CPI-E (E for elderly). CPI-E would ostensibly be more representative of the spending habits of retirees and those on fixed incomes.

It’s not that the elderly don’t spend their money on gas, housing, or food. Of course they do. They just don’t spend it in the same amounts as those who are still in the workplace. Hopefully Congress can be persuaded to allow for the index to be changed so that cost of living allowances can be calculated in a more representative fashion.

Next month there will be an open season for health insurance changes. Already the Beijing branch of the federal Office of Personnel Management (OPM, my HR office) has announced that health plan costs for 2016 will rise by an average of approximately 7%. This has prompted me to start an early frenzy of comparison shopping so that I can find a less expensive alternative to the insurance provider under which we are currently covered. If health insurance rates are rising, and my annuity can’t stay even with inflation because Uncle Sam won’t give me no stinkin’ COLA, I’m going to have to settle for a Chevrolet Impala-level of coverage rather than the slightly more upscale Toyota Camry that I’ve been carrying for the past many years.

What the Department of Labor and OPM are currently doing to me, I will in turn have to do to my lovely wife and my equally lovely step-daughter. Because this is a PG-rated blog, I’ll just say that “it” happens, and it also rolls downhill.  And so it goes.

So careful of that next cola you drink. And save the can afterwards. You might need the deposit.

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14 thoughts on “The UnCola

  1. Sorry for being a politcal wishful thinker, but bet Bernie Sanders would do his best to not let what you’re describing happen. Just sayin…

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  2. I cabled Beijing with a cc to OPM-DC that Tony may need to stay at The Bee until at least 62 the way things are going; the last six I see as a Park Ranger in Badlands National Park where I can grow a beard, wear dark sunglasses, talk about fossils and wildlife all day and not be considered for a corner condo at St. Elizabeth’s in DC. Work is too much fun !!!! 🙂 Can’t believe you are going on two years out ! Congrats ! Time flies. Glad the supplemental is kicking in soon. The thought of what expenses will decrease and increase in retirement has crossed my worried mind. The assumption by most working is that all decrease, but not so. Case in point is the health care costs which I thought were promised to go down, but the trajectory is always up and will remain that way unless the industry is changed dramatically. It is scary to think about facing these costs with a static or slow growing retirement income. Another case is owning a car, something a retired person is liable to use a lot more for daily and yearly trips – have you seen the price of airfares these days??!!!. I haven’t bought one since 2001 and got sticker shock when looking at ads the other day. Wow, they’ve gone up!! One used to be able to buy a house back in the day for the price of a car/truck today. I think I’ll keep my car with 120,000 miles for another 7 years or so but that means buying one right before an early retirement. The other thing I am considering is where to retire and I am leaning more and more towards a state with no income tax because that could save thousands each year. The could be the difference between affording to replace a roof or fixing a car in retirement. Thinking of all of this, Tony may have to be a stalwart employee at The Bee, affectionately known as ‘Old Red Cap’, for quite some time. 😦

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  3. Red Cap indeed! That in fact might be our answer– porters on a rail line! There indeed is no stability when it comes to medical costs. Had Teddy Kennedy taken Richard Nixon’s offer back in the seventies on his plan for nationalized health insurance we wouldn’t even be fighting over Obamacare these days. But alas, once turned down, Nixon embraced what came to be known as “Health Maintenance Organizations,” healthcare became even more privatized, and the die was cast. I’m grateful too that I never gave away our car as we had planned last year. I would have done so to help my daughter-in-law, but as things worked out it’s better. I will let my Toyota soon go into 100,000 miles and beyond. The next car I buy will undoubtedly be a used one– the first used car I think I’ve had since post-college days. May the Bee continue to sweeten your retirement plan, Tony!

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  4. We will also sustain a decrease in our income next year. Health costs (and we are healthy) are continually increasing even if we have the lowest coverage. Drugs increases are incredible. One drug increased $20 from January to July. That was a 20% increase in 6 months. I always pray that we don’t get a serious illness that requires those lifesaving drugs that no one can afford. AARP old-timers will have to go rogue and stampede (with walkers and canes) Washington.

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    1. I totally agree, Kate! I’ll never forget the image of then-Ways and Means chairman Dan Rostenkowski’s car being mauled by protesting seniors because of his agreement to cut Medicare back in the 80’s. Nothing scares politicians more than seniors marching. I think it’s absolutely CRIMINAL how drug companies are now taking decades-old generics and raising their prices, all in the name of “research.” Uh-huh.

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  5. $2.00 a gallon gasoline????? We are over $3.00 here. I wonder if “they” take an average when calculating COLA, or just look at one or two areas of the country. I’ve also heard that they make crazy equivalencies like “since the price of beef has gone up, people substitute chicken so, in essence, there is no inflation.”

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  6. RE: the lack of COLA. Well, Marty, if you had reached Medicare age, you could just be glad that you are in PERS rather than CSRS. Those of us in CSRS, like other who do not have our Medicare payments deducted from Social Security payments, will be seeing our Medicare payments go up 52%, as the “Hold Harmless” provision of the law means that in years in which there is no COLA Social Security recipients will not have to cover the increased cost of Medicare, while the other 30% of us get to cover the increased cost for everyone. I am happy to be in CSRS and I am not complaining, mind you, but the law can be very quirky and those of us under the old system are about to get bitten. Unless the GOP Congress bails us out with a last minute fix to the system. Whaddaya think the likelihood of that is?

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    1. Clarification and correction for readers: My friend Tip made a slight keyboard error. He actually meant “FERS” rather than “PERS.”

      Tip, indeed I am aware of the 52% hike on Medicare payments for CSRS annuitants who don’t have those payments deducted from Social Security. That’s a huge chunk of change! I want to hope that someone in the Congress will recognize this, but I’m afraid anyone who does will be in the minority party. It’s going to be a very, very difficult 2016 for quite a few people. I’m afraid many will take shortcuts with their healthcare (i.e. skip meds to every other day, etc.). Thanks for pointing this out!

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