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.
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.
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?
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.