How to Predict the 2023 COLA and Avoid Being Surprised by a Lower Annuity Payment – Federal Retirement News

Last year, the entire cost-of-living adjustment (COLA) of 5.9% was the highest in 40 years. The COLA in 2023 is projected to wipe out that 40-year record, stirring the question of what the COLA for 2023 would be.

One COLA prediction for 2023 is 7.6%

The Senior Citizens League predicted a 5.3% COLA last year. But because inflation continued to rise, this turned out to be lower than the actual COLA amount of 5.9%. The COLA forecast for 2023 could be too low, given that inflation is still rampant and rising.

How To Calculate The COLA For 2023?

Here is how the 2023 COLA is calculated:

  • The Consumer Price Index (CPI-W) values are taken from the current year’s third quarter (July–September).
  • These figures are then compared to the average CPI-W reading from the prior year’s third quarter (2021).
  • The average reading for this year’s (2022) third quarter is compared to the previous year’s third quarter (2021).
  • If the average CPI-W rises in 2022, beneficiaries will receive the difference, rounded to the nearest 0.1%, as an increase in 2022.
  • If the value is lower, no adjustment is made, suggesting deflation, which happened multiple times throughout Obama’s presidency.

While it’s quite improbable that there will be no COLA raise in 2023, the question is how much inflation will rise and what the final COLA estimate will look like then.

Calculating the Cost-of-Living Adjustment (COLA) for FERS Employees

The COLA calculation differs for employees under Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS).

• If the CPI rises by less than 2%, the Cost-of-Living Adjustment (COLA) is equivalent to the CPI rise for FERS special benefits.

• The COLA is 2% if the CPI rises by more than 2% but not more than 3%.

• If the CPI increases by more than 3%, the adjustment is 1% lower than the CPI increase. The new figure is rounded to the nearest whole dollar.

• Except for disability, survivor benefits, and other notable provisions upon retirement, FERS special COLA is not provided until age 62.

How To Calculate the COLA for CSRS?

For Civil Service Retirement System (CSRS) employees’ benefits, the COLA percentage increase is typically applied to the monthly benefit amount before deductions are made. Payments are rounded to the nearest whole dollar.

How Will the COLA of 2023 Affect Your Annuity If You Retire in 2022?

Those wondering how to calculate their 2023 COLA should consider numerous factors, like the retirement system that applies to them, how many months since they started receiving retirement payments in the previous year, their age, and whether they are eligible for FERS special benefits, and so on.

Contact Information:
Email: [email protected]
Phone: 8139269909

For over 30-years Joe Carreno of The Retirement Advantage has been a Federal Employee Retirement System specialist (FERS) as well as a Florida Retirement System specialist (FRS) independent advocate. An affiliate of PSRE (Public Sector Retirement Educators), a Federal Contractor & Registered Vendor to the Federal Government, also an affiliate of TSP Withdrawal Consultants.

We will help you understand your FERS & FRS Benefits, TSP & Florida D.R.O.P. withdrawal options in detail while recognizing & maximizing all concurrent alternatives available.

Our primary goal is to guide you into retirement with no regrets; safe, predictable, stable, for life. We look forward to visiting with you.

Not affiliated with the U.S. Federal Government, the State of Florida, or any government agency. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Although we make great efforts to ensure the accuracy of the information contained herein we cannot guarantee all information is correct. Any comments regarding guarantees, safe and secure investments & guaranteed income streams or similar refer only to fixed insurance and annuity products. Fixed insurance and annuity product guarantees are subject to the claims‐paying ability of the issuing company. Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. Annuities are not FDIC insured.

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