COLA For Federal Retirees In 2023

According to the Bureau of Labour Statistics, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) climbed 9.4% in the last year to 283.176 (1982-84=100). (BLS). Before seasonal adjustment, the index increased by 1.5% in March.

How Will The Cost-Of-Living Adjustment (COLA) Estimate For 2023 Be Calculated?

The Cost-Of-Living Adjustment (COLA) is typically calculated by comparing changes in the CPI-W from one year to the next, using the average of the third-quarter months of July, August, and September. For the third quarter of 2021, the average CPI-W was 268.421.

The percentage change in the base quarter price index from the previous year to the year when the COLA is to take effect (the final number is adjusted to the nearest 1/10 of 1%) determines its amount.

The trend toward a 2023 COLA as of March 2022 is: (283.176 – 268.421) / 268.421 x 100 = 5.496 (adjusted to the closest 1/10 of 1% = 5.5%)

On May 11, 2022, the Consumer Price Index (CPI) for March will be revealed.

The Social Security Administration (SSA) will release the official 2023 COLA in mid-October 2022. The SSA will compare the third quarter of this year (ending September 30) to the previous year’s third quarter to determine the percent change in average prices.

The COLA for federal retirees in 2022 will be 5.9% for those on CSRS and 4.9% for those on the Federal Employees Retirement System (FERS).

The yearly COLA is tied to the increase in the CPI as established by the Bureau of Labor Statistics (BLS) of the Department of Labor.

Calculating COLA

Each COLA is calculated using a formula specified by the Social Security Act. As mentioned above, COLAs are determined by increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), according to the formula. The Bureau of Labor Statistics (BLS) calculates CPI-Ws every month.

It’s crucial to define several words first:

• The first quarter. For any given year, the calendar quarter begins on July 1 and ends on September 30.

• Workers’ Consumer Price Index (CPI-W). The Bureau of Labor Statistics (BLS) issues a monthly index that measures changes in consumer prices for urban wage earners and clerical workers.

• Price index for the first quarter. The CPI-W arithmetical mean for the three months that make up the base quarter – July, August, and September.

• COLA is an increase in an annuity based on the rise in the base quarter price index between consecutive base quarters. COLAs kick in on December 1 of the year when an annuitant becomes eligible. Increases are first reflected in annuity cheques issued in January following the effective date and the start of an annuity’s accrual period.

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