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Giant COLA: Mixed blessing!

Official confirmation that the January cost of living adjustment (COLA) for federal retirees will be 5.9% is good news. Up to a point! It is the biggest catchup-with-inflation adjustment in more than two decades. And its good news for the majority of former feds or their surviving spouses. Also for people who get Social Security benefits or are retired military.

But a COLA this size carries a double message. First, that inflation — which has been moderate for the past ten years — is back. The last big COLA for civil service retirees was 5.8% in 2012, and was part of the recovery from the Great Recession of 2008-2009. Inflation means higher gasoline prices and that translates into hikes for food, transportation, energy. In fact just about everything. Last January, retirees who got a full COLA received a 1.3% increase in their monthly annuity benefits. Before taxes, of course. The second downside to the inflation catchup program is that not everybody will get the full increase. And some will get nothing, meaning even more belt-tightening!

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