One question that we see from readers on a regular basis is something along these lines: "How much will our cost of living adjustment (COLA) go up next year?" In fact, one reader sent in a column on this topic a few months ago that we published on this site.
We don’t know how much health insurance premiums will go up in 2011 but chances are there will be an increase that will be substantial for some programs under the federal health benefit plan. But, while some of your expenses may be going up, it seems unlikely that there will be a COLA increase next year. To the dismay of some, this will be the second year in a row that there has not been an increase. (See What Happened to My COLA for 2010?)
The reason an increase in 2011 is unlikely is because inflation, as measured by the relevant consumer price index, is showing the cost of living has gone down since October 2009. For now, the inflation index shows a decrease of 0.7%. That could change in the next seven months but, for now, that does not seem likely.
So, if you are wondering why your 2011 retirement annuity may not go up as a result of the cost of living, the reasons are similar to what happened in 2010.
Some readers have asked if there has ever been a time when there was no COLA increase for two years in a row. The answer is "no," that has not happened. In fact, if you look back at the history of the COLA, there was never a time when the increase was 0.0% as happened in 2010. Prior to last year, the lowest COLA increase was 1.3% in 1998.
No doubt, some who asked about the 2011 COLA increase that would take effect in January are disappointed in the answer but, despite the disappointment of some, the projected outcome seems fairly certain unless Congress decides to implement a change.