Calculating Your 2013 COLA

By on June 25, 2012 in News, Retirement

A number of readers have asked about a possible increase in their retirement annuity payment or Social Security payment starting in January 2013. In short, they want to know if they will get an increase and, if so, how much they will receive.

No one knows yet what the COLA increase, if any, will be and we won’t know the answer to these questions until October. There was no COLA increase in 2010 or in 2011. In 2012, CSRS employees received up to 3.6%. (See How to Calculate Your 2012 COLA Payment) The Congressional Budget Office recently predicted a 1.3% increase in 2013.  But, if you are retired, we can speculate with some degree of certainty that your standard of living will decline unless you have another source of income. Here’s why.

If the increase were to be announced today (ignoring the next four months of probable changes), the COLA increase would be about 1.5%. What will happen in the next several months is anyone’s guess but the 1.3% figure referenced above is probably as good a guess as we will have for now.

When you eat in a restaurant or buy food at a grocery store, you will have noticed an increase in prices over the past few months. In some cases, prices have remained the same but manufacturers have cut down on portion sizes to remain profitable while keeping prices at the same rate despite inflationary pressure.

Depending on where you live, housing prices may have bottomed out and, if you live in one of the most prosperous areas of the country, like the Washington, DC metropolitan area, housing prices are going up again.

Anyone who has shopped for a TV set, furniture or various household goods in recent years has noticed that prices are dropping for many items. Workers in China, India, Eastern Europe and other parts of the world work for lower wages and benefits than workers in the United States. Our manufacturing jobs have been going overseas because it is cheaper and easier in many cases to build products overseas and then import them back into the United States. 

If you are retired, chances are you are paying more for medical expenses and medical insurance than you paid a couple of years ago and may not be buying a house or adding to your elaborate TV/music playing set-up in your retirement entertainment cave even though these items are partly responsible for a lower cost of living increase.

If you think your actual expenses are going up more than 1.3% or so, perhaps you are correct. A private website that tracks inflation shows the real inflation rate of more than 4% by eliminating what it refers to as the “biased and often-manipulated government reporting”—presumably because it is the government’s intent to lower future payments and adding even more dollars to the massive federal deficit.

Depending on your health insurance plan, your increase in medical insurance payments have probably been going up at a higher percentage rate than any COLA increase you have been getting or will get in January.

For example, in 2010, health insurance premiums increased by an average of 8.8%. There was no COLA payment for that year. In 2011, when there was again no COLA increase, the average federal employee paid 7.2% more for health insurance.  This increase, according to the OPM director, was good news because the government had added more requirements for federal insurers and the increase was less than it had been in 2010. In 2012, when the full COLA was 3.8%, the health insurance rates went up another 3.6%, on average, for federal employees.

As the government has been requiring insurance companies to include more benefits, and more tests and services may now be available, costs generally go up even though the cost is spread out among everyone who uses the federal health insurance plan.

One obvious example: Why should a couple with no children pay the same amount for health insurance as a family of five people? The answer is because the government is spreading out the cost to make it more affordable for families. As is often the case, someone else is paying to reduce the cost for those who are enjoying the benefits.

Most readers can probably count on their health insurance costing more in 2013. No doubt, some readers will shop around for a less expensive plan to try to curb these escalating costs. If you choose to do this, your expenses may actually go down although you may have less insurance available if you have medical issues. To help you make the best decision for your own circumstances, when the new rates become available, we will provide the information so you can begin shopping around for the best deal for your individual situation.

Interest rates are now being held to artificially low levels by the Federal Reserve. The Fed is trying to get people to invest in stocks and borrow money at low rates to stimulate the economy by buying stuff. The printing of money by the government to keep rates low is suppressing the underlying rate of inflation, at least for the near future. Economists disagree on the long term impact of this policy but the end result will probably be a significant impact on our economy and our standard of living in the next few years when the artificial economic stimulation ends.

In the meantime, retirees would be well advised to conserve their assets, cut expenses where possible to do so, and avoid spending financial reserves to meet your routine living expenses. The COLA payment you receive in January, if any, will not cover your actual increase in expenses and these costs will have to be made up from other sources of your income or your financial reserves.

The Federal Employee Pay Raise

To try to eliminate any confusion, the COLA payment applies only to federal retirees, not to currently employed federal workers.  If you are a federal employee who is still working for Uncle Sam, you are certainly aware that there has been a freeze in basic pay rates for the past two years although many readers may have received a promotion, a bonus payment or a within-grade increase.

We do not yet know if there will be a pay increase in 2013. The Obama administration has proposed a raise of 0.5% but that has not been approved by Congress. If the usual scenario is played out this year, we will not know the amount of any raise in 2013 until very late in the year.

You can check out the current federal employee general schedule pay rates and even check on individual federal employee pay rates through our FedsDataCenter.com Web site.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

43 Replies

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  1. Bob Cloutier says:

    I am so sick and tired of constantly reading and hearing about we Seniors and Veterans perhaps not getting a COLA for 2013 and beyond and if we do it will only be a 1.3 or 1.6%.  My question is why?  To my thinking if the Government would keep their dirty hands out of the Social Security Pot (which isn’t legally theirs) we’d have enough money to get a true COLA.  All you hear is how Social Secuirty is broken and will run out.  It won’t if they kept their hands out of it and stopped using it to pay other things they deem necessary rather than on Social Security.  The rich, of course, could care less because it doesn’t affect them but for those of us who can longer work and have to depend on our Social Security as a “fixed” income and believe the government is making darn well sure ir remains “fixed,”  we can hardly keep up with the rising cost of everything.  This should never exist in these United Statess but the fact that is done is the fault of our Government Politicians who are not really working for us!  I had savings and my wife got drastically sick and we had to use our savings plus to pay for things she needed to remain alive which Medicare wouldn’t pay for so what else was I to do.  Now I have to depend on my Social Security (and by the way when she died, I lost her Social Secuirty Payments).  Does this make any sense?  I would like someone out there try to explain to me where there is any sense or justice in my case and I believe more cases like mine out there.

  2. john says:

    It is what it is–and I appreciate you telling it as such!

  3. guest says:

    One can be sure whatever the increase in SS will be offset with an increase in Medicare

  4. Telltruth says:

    I don’t go to drs and take meds.  I use natural remedies and holistic practitioners pay thousands for it out of my pocket!  Why should I pay for your drs and drugs?

  5. wegov1 says:

    I tend to think that all Government employees get minimum wage an that includes the President of th USA and all staff members along with all Representitives and there staffs. HOUSE AND SENATE, and all STATES GOVERNMENTS. It would help prevent political corruption but not eliminate it. Also what these offical  could spend on campaign to be electected.

  6. wegov1 says:

    AS for how we are being cotrolled by the governments of the world, and our monetary system is based on produce production or services rendered. It would seem to me if you employ everyone and gave tax insentivecs to employers and we made products and provided services we would not have a debt anywhere in the world. Provide a card for payments receiveable and payments payable in one card and as you use your card you cause a need for service and products and it is a win win win situation, SIMPLE no need to try to balance the budget or to control anyone just report for work and your bills are paid. It really is just a little more complicated than that you must make allowances for required days off vacations, and medical leave and retirement, and disabilities, other than that SIMPLE!!

    • Sam Hill says:

      I agree, but sadly, and tragically, the federal government does not (and has not for a long time) follow the U.S. Constitution.  About 90% of what it does is not permissible by the Constitution.  It is only allowed the specific powers defined in Article I section 8.  All other powers are left to the people or to the states (Amendment X).  But the people let them get away with it …

  7. Wegov1 says:

    Since we have had a 4.1% increase over the previous year and Cost Of Living Allowance is based on that rate we should expect an increase of 4.1% in the federal COLA. That is my take on the matter!

    • Sam Hill says:

      I agree, but unfortunately the formula for determining the COLA (at least for CS retirees and SS recipients) is flawed.

  8. Cashgirl59 says:

    If social Security does not get a decent raise in COLA, we a Dependant of 3, we won’t have enough money to pay living expences with everything going up an a 12 year old girl in middle school!!!!!

  9. John Clark says:

    Don’t forget our current president took well over $700 billion dollars out of Social Security.  Keep in mind as well our current president said if he could not get unempoyment to around 5% by this time he was only going to serve 1 term.   Forgetting about the presidential race until November somebody tell me something that ALL our leaders in Washington hasn’t screwed up everytime they attempt something.  As far as I’m concerned you can just give me what I have put into Social Security and let me take care of it.  Wake up America – Everyone of us is already over taxed.  We pay income taxes (some of us pay not only federal but state taxes), gas taxes, sales tax, etc.  Giving the government more money is a waste.  Giving the government more control of making decisions for us is socialism.  This country was build on freedom of religion as well as freedom from taxes.  When was the last time a federal agency filed for bankruptcy because we took too much of their money?  Wake up vote them all out of office. 

  10. Debbie_lanning says:

    Just stop paying for free healthcare for the whole Congress when they are in office and after they retire. No one I know gets free healthcare but the very poor and immigrants.

  11. J. J. says:

    This information is very enlightening, since I am a federal retiree.  My family and I will try to apply for food stamps and any other program that will help sustain us.  Thanks a lot!

  12. Margaret Leps says:

     Why should a couple with no children pay the same amount for health insurance as a family of five people? The answer is because the government is spreading out the cost to make it more affordable for families. As is often the case, someone else is paying to reduce the cost for those who are enjoying the benefits.  It seem it is time that those that are enjoying the benefits pay for them.  Personaly, I could barely afford to pay for myself and never thought I could afford children.  Now I must fund everyone elses children.     

    • Your kidding? No? OH! says:

      Right, and why should the taxpayers fund approximately 73% of YOUR health plan?  The answer is, that is the way the system is set up.  You are certainly welcome to decline your health insurance and go find one on the economy that you feel is more in line with the cost/benefit you pay and receive.  While I will not always defend the FEHB program, I do take issue with the fact that we get a generous portion paid by the Government.  Leave it to certain politicians, that ratio would decline.  Which would you rather have?  I’ll take the current system, thank you.  Oh, and make sure you thank every taxpayer you come in contact with, because they are paying for you to enjoy those benefits.  Funny how it works out, the same thing you complain about is the same thing you benefit from.

  13. wombat1951 says:

    Anyone on one of the old CSRS pensions already has it made.

    So in time when Obama can’t seem to figure out how to get a recovery going, and when millions of folks are still looking for jobs — well cry me a river that Fed retirees might “only” get a 1.5% increase in their guaranteed pensions.

  14. guest says:

    Please provide references to the source of your statement “Taxpayers fund 95% of FERS so the amount contributed from the ‘personal funds” of Federal employees is next to nothing.” and please give detailed info concerning what in FERS you are refering to (95% on ???)…

    • The Master says:

      He won’t do any of that, because he can’t. He’s just bitter that he never qualified for a fed job.

    • Weaveman01 says:

      What’s to prove?  The taxpayers fund the entire government. That means’s its employees, their pensions, and insurance.  The little bit of copay and shared premium that you pay is the only thing that isn’t paid by the taxpayer- directly.

  15. Syzygy says:

    You’re right about the 1.5% estimate through May; if the core rate in the CPI-W continues at 0.3%/month, the Dec 2012 cola will be 2.4% (payable in Jan 2013)

    • Guest says:

      The CPI is calculated September to September. October through December will be part of next years calculation.

  16. Candygirl says:

    Personally, I think we retirees need to mentally condition ourselves for less and less spending power and COLA’S in each forthcoming year. I have had to cut back like many folks this past year— I had the dental coverage but dropped it for 2012. Thankfully, we needed no major work and had crowns done last year in preparation for this decision. I only hope nothing major pops up in the meantime. I will re-instate the insurance for next year and continue along this path every other year.  I dread the thought of replacing our 8 and 10 year old vehicles so we are maintaining them and treating them with kid gloves.

    • $15300432 says:

      There is plenty of part time work available that would be a better alternative than whining

      • Candygirl says:

         I’m not whining—-just looking at the reality of the economics of the present time.

  17. guest says:

    Since Congress spent the money that was contributed from the personal private funds of federal employees over a > 30 year period (the money was treated as the the money was tax money from taxpayers and therefore spent on taxpayers) …and with no actual accumulated interest showing…and the money in 1977 was worth more than money in 2012….then an adjustment for inflation is owed to retirees (apparently from taxpayers since the private money was spent allegedly for taxpayers or in place of taxpayer money by CONGRESS!!)!!!!

  18. Drider1 says:

    Great Article Ralph–informative and easy to read

    Don R

  19. CR says:

    I don’t know why we Retirees have to carry the brunt of families of 3 or more.  We are on fixed incomes and would appreciate a benefit like the Benefeds Program that offers “Plus One” premiums that is one step up from the single option.

    • $15300432 says:

      When you had children others carried your freight so what’s the problem now??? Besides the taxpayers fund 75% of the costs anyway

      • Bgboettch says:

        You’re also not on a “fixed income”…you get a COLA.  Same is true of Soc Security recipients.  Income rises.  Fixed means exactly that…a certain amount, no more, no less.  Literally no one is on a “fixed income.”

  20. $15300432 says:

    No taxpayer pension is inflation protected so any raise we receive is charity from the taxpayers 

    • PublicCitiZen says:

      Feel free to donate it back.

    • Guest says:

      Social security is.

    • guestagain says:

      Since Congress spent the money that was contributed from the personal private funds of federal employees over a > 30 year period (the money was treated as the the money was tax money from taxpayers and therefore spent on taxpayers) …and with no actual accumulated interest showing…and the money in 1977 was worth more than money in 2012….then an adjustment for inflation is owed to retirees  (apparently from taxpayers since the private money was spent allegedly for taxpayers or in place of taxpayer money by CONGRESS!!)!!!!

      • $15300432 says:

        Gee maybe you don’t understand the topic. Taxpayers fund 95% of FERS so the amount contributed from the ‘personal funds” of Federal employees is next to nothing. The $ was worth more n 1977 yes it was but your receiving more in benefits in the 1st 15 months of retirement than you ever contributed.
        Seeing as how your total investment was recouped in a few months no one owes a inflation protected pension. I would expect 1 of 2 things will happen before Nov. Either CS pay 5% toward their pension or congress will have to eliminate the $560B shortfall by doing away with COLA’s for CRS and FERS

        • guest says:

          Please provide references to the source of your statement  “Taxpayers fund 95% of FERS so the amount contributed from the ‘personal funds” of Federal employees is next to nothing.”  and please give detailed info concerning what in FERS you are refering to (95% on ???)… 

    • Bfwbutahsucks says:

      So, we work for 30 plus years and now you say it’s charity from the taxpayers….what are we, chopped liver?

      • $15300432 says:

        the taxpayers funded 95% of the cost to begin with and no one in the private sector has an inflation protected pension. So to answer your question yes you are

        • The Master says:

          All pensions are adjusted for inflation. If they were not, retirees on private pensions would lose buying power and become poorer over time.

          • $15300432 says:

            Are you NUTS??? that is exactly what happpens with private pensions

          • The Master says:

             No, you are. As I have previously provided links demonstrating private pensions with COLAs that you have ignored. I am only providing a single example this time. Not for you, for others to see what kind of person you are. http://benefits.northropgrumma

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