Federal Retirement Annuities

Federal Annuities, including Social Security, should be indexed to the rate of inflation, not to a mythical shopping cart! That would protect and stabilize the purchasing power of annuities as promised to Social Security payees and other federal annuitants.

The average rate of inflation has been 3.5% over the past 40 years or so, but the cost of living index (COL) used for Federal Retirement Annuities is based on a mythical shopping cart. The contents of that cart do not necessarily reflect actual purchase patterns of retirees and the COL adjustment this year was zero even though inflation has continued. In this, the government, using an artificial index instead of actual inflation rates to compute the cost of living, is not living up to it’s commitment to protect the purchasing power of annuities.

In one annuitant’s case, under the COL index, his annuity has doubled over some 40 years. However, his annuity should be triple the original amount in order for him to enjoy the same purchasing power he had when the annuity started! So every year he is forced to dig deeper into his modest emergency savings just to keep up with real price increases in rent, utilities, food, etc.  His problem is that those emergency savings will soon be gone; then what does he do?

It’s a sad way to treat folks who have worked and contributed to their retirement plan only to lose the purchasing power of their earned annuity!