The yearly Cost-of-Living Adjustment (COLA) is calculated using a federal government index compiled by the Bureau of Labour Statistics (BLS). The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is the index in question. Over the previous year, this metric has increased by 9.4%.
The COLA is calculated as follows:
• The Consumer Price Index (CPI-W) values are from the current year’s third quarter (July–September).
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• The average reading for this year’s (2022) third quarter is compared to the previous year’s third quarter (2021).
• The difference is what beneficiaries will get as an increase in 2023, rounded to the closest 0.1%.
How much inflation will rise, and how will the final COLA computation be calculated?
The answer to this question will be calculated and announced in mid-October.
As of last year, federal retirees earned a 5.9% COLA raise under the Civil Service Retirement System’s (CSRS) Social Security benefits and annuities in 2021. Moreover, an increase of 4.9% was implemented in January 2022 for Federal Employees Retirement System (FERS) annuities.
So far in 2022, the average CPI-W for the third quarter of 2021 has increased by 5.50%. The annual COLA is calculated by comparing the changes in the CPI-W from one year to the other. Average of the third-quarter July, August, and September are used.
According to the Senior Citizens League, inflation figures from last month predicted a 7.6% COLA in 2023.
Later this year, the Federal Reserve will begin to hike interest rates to contain inflation. It is still under probability how successful it will be. Inflation has continued to rise so far.
While no one knows what will happen with inflation, some federal retirees and Social Security recipients may receive an 8% COLA increase in January 2023.
Reported Rate Of Inflation vs. Inflation in Reality
For many years, price fluctuations in a fixed-weight basket of commodities were used to measure consumer inflation. In other words, it calculated the cost of living for an individual or a family to maintain a consistent standard of life.
However, rising inflation has political ramifications. Elections are sometimes won or lost based on inflation rates. However, throughout the 1980s and 1990s, a new theory of assessing inflation arose for whatever cause.
Inflation is calculated by comparing the cost of at-bone steak from one year to the next, using a fixed-weight basket of commodities. A new measurement was developed throughout time. In other words, comparing what a family spent on food from one year to the next may be similar, but only because the family shifted from steak to chicken. Despite eating less expensive meals, the consumer’s “level of satisfaction” may remain the same.
Contact Information:
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Bio:
For over 20 years, Jeff Boettcher has helped his clients grow and protect their retirement savings. “each time I work with my clients, I’m building their future, and there are few things that are more important to a family than a stable financial foundation.”
Jeff is known for his ability to make the complex simple while helping navigate his clients through the challenges of making the right investment decisions. When asked what he is most passionate about professionally, his answer was true to character, “Helping my clients – I love being able to solve their problems. People are rightfully concerned about their retirement income, when they can retire, how to maximize their financial safety and future income.” Jeff started Bedrock Investment Advisors for clients who value a close working relationship with their advisors.
A Michigan native, Jeff grew up playing sports throughout high school and into college. While Jeff is still an ‘aging’ athlete, Jeff will take more swings on the golf course than miles running these days. He creates family time, often with weekly excursions to play golf, a hobby he shares with his three young children.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
