Why You Shouldn’t Think of Your COLA as a Raise

 

One of the most common questions members ask at Pre-Retirement Seminars is ‘what is the average cost of living adjustment LAGERS retirees receive each year?’

This is a tricky question to answer because while we can historically look back at the average annual adjustment to retiree benefits, it doesn’t really tell us much about what retirees can expect (or should plan for) in the future.  In fact, it would be a mistake to think of your cost of living adjustment as an annual raise you that plan for each year.  Your LAGERS’ COLA isn’t a raise, because it’s not designed to just put more money in your pocket from year to year.  Rather, it is meant to help the benefit you retire with maintain its purchasing power over a long period of time.

Your COLA helps you maintain your current standard of living throughout retirement by ensuring that as the cost of goods and services increase, your LAGERS benefit can continue to purchase the same basket of goods, even as they continue to get more expensive.  Just keep in mind, the cost of living doesn’t always increase at a steady rate (sometimes it even goes down), and these fluctuations mean that your COLA will vary from year to year.  But no matter what, LAGERS retirees know that their benefit will always keep pace with inflation, enabling them to comfortably maintain their standard of living well into a twenty or thirty year retirement.

 

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