Should You Worry About the COLA Trap?

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The Bureaucrat

The Bureaucrat

Күн бұрын

The COLA Trap is a fluke in the way military pensions are adjusted for inflation that can cause a person who SERVED LONGER to get a SMALLER pension (for life). It is worth understanding, but is it worth stressing out about?
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Note: The views expressed in this video are the presenter's and do not represent the policy or guidance of the Department of Defense or its subordinate elements.
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Пікірлер: 21
@bcvpiper8356
@bcvpiper8356 11 ай бұрын
This video is perfectly timed! I'm retiring between now and 01 JAN 25, and have been trying to figure out the most financially advantageous month to go. I bump up one year TAFMS/TIS in June, but I thought that waiting until 01 JAN 25 would be best. There's A LOT to think about with a pending military retirement and your videos have been a big help! Thanks for taking the time to put them together.
@the_bureaucrat
@the_bureaucrat 11 ай бұрын
Glad to help. Just a small thought...I'm not a big fan of retiring on the first of January. Especially if you are going to take a large chunk of terminal leave. Late November and December are generous with federal holidays and it doesn't make sense to take leave when you could just be taking a weekend off. If you're serious about 1JAN, then consider taking a lump of leave well before the end.
@bcvpiper8356
@bcvpiper8356 11 ай бұрын
@the_bureaucrat That's makes a lot of sense. Thank you! I'm trying to go earlier if possible. I'm in the process of trying to secure a federal or contract job. Once that happens, I'll pull chocks as soon as I have everything in order. There sure are a lot of ducks to get in a row!
@stom3998
@stom3998 8 ай бұрын
Great video! I watched a lot of your videos! I've also watched similar COLA videos and read the paper years ago. For some reason, I thought of one argument while watching your video that I hadn't considered before. Aren't the Active duty and the retiree experiencing COLA simultaneously, regardless of their working status? So, shouldn't they receive the same adjustment irrespective of the month of retirement? My logic might be flawed, but I had to throw it out.
@the_bureaucrat
@the_bureaucrat 8 ай бұрын
You are kind of right, but there is a weird nuance with Regular vs. Reserve retirements. You are correct that once the Reserve Soldier starts collecting their pension (typically at age 60), they get the same COLA rates. But a Reserve pension is calculated when the Soldier beings collecting retirement, not when they become eligible. So if you had two Soldiers who became eligible for a pension on the same day (one Regular and one Reserve). The Regular pension would be based on Years of Service at the time the pension begins, but the Reserve Soldier stays in a "Grey Area Retiree" status and when they get their pension, its based on the Years of Service up to the point where they claim their pension. During that time period, the Regular guy is getting COLA adjustments, but the Reserve guy is getting Pay Increases which are handled differently. If you want to war game more, email me at chuck dot weko at gmail dot com.
@TheAnhydrite
@TheAnhydrite 2 ай бұрын
Are your yearly graphs available for download?
@the_bureaucrat
@the_bureaucrat 2 ай бұрын
Shoot me a note at chuck.weko@gmail.com and I can send you some stuff.
@dominicesparza8802
@dominicesparza8802 6 ай бұрын
So it is better to retire 1 Jun or 1 Jul? I am in debate with a fellow Warrant Officer. Your chart shows Jun being more optimum. So in order to get that, what is the retirement date?
@the_bureaucrat
@the_bureaucrat 6 ай бұрын
Oh...the thing to watch out for here is that for "normal" retirees, their last day on Active Duty is the last day of the month. Your Partial COLA adjustment is based on your first day as a retiree. If you want credit for retiring in the APR-MAY-JUN quarter, you have to retire on 1JUN. If you wait until you 1JUL, your retirement will be considered as occurring in the JUL-AUG-SEP quarter. Specifically look at 10USC1401a(d)(2) uscode.house.gov/view.xhtml?req=%22cost+of+living%22&f=treesort&fq=true&num=32&hl=true&edition=prelim&granuleId=USC-prelim-title10-section1401a
@dangutknecht5632
@dangutknecht5632 6 ай бұрын
So Q4 retirements get none of the partial COLA for the current year since they weren't exposed to inflation, but they would still get the full bump on 1 Jan? Is there a significant advantage or disadvantage then to retiring in Nov/Dec versus 1 Jan?
@the_bureaucrat
@the_bureaucrat 6 ай бұрын
Not a big enough on to build your whole retirement plan around it. The thing about the COLA trap is that we don't have enough information going into the retirement year to know what is best.
@ramirezj33
@ramirezj33 6 ай бұрын
At about 9:55 in the video you mention Oct-Dec retirements. Are you basically saying that a person retiring in any of these months would eventually get a full COLA increase in year 3? For me it's either a July 1 or Oct 1, 2024. Not sure I want to wait until March 2025. Thanks
@the_bureaucrat
@the_bureaucrat 6 ай бұрын
What happens with the OCT-DEC folks is that they don't get a "partial COLA" adjustment. But in their first full year of retirement, they get a "full COLA" in which NOV and DEC retirees have not been exposed to 12 months of inflation. So they get a small benefit. The thing that worries me about your plan is that 1JUL puts you in the JUL-SEP quarter not the APR-JUN quarter. Normally you would want to retire on the first day of the last month in the quarter. Hit me up at chuck.weko@gmail.com if you want to go deeper.
@ramirezj33
@ramirezj33 6 ай бұрын
@@the_bureaucrat Thanks for the clarification. Sent you an email as well.
@ArcticDeath
@ArcticDeath 6 ай бұрын
I’m really debating on dropping retirement for a 1DEC date as oppose to hanging on until MAR. What are your thoughts? Probably not worth waiting?
@the_bureaucrat
@the_bureaucrat 6 ай бұрын
I’d agree. Probably not worth waiting. The big thing to watch out for with a 1DEC is getting stuck with too much leave. If you enter FY25 with say 50 days leave, you will have to sell some
@ArcticDeath
@ArcticDeath 6 ай бұрын
@@the_bureaucrat Valid point! Probably should ensure I have no use or lose prior to the start of the FY!
@lupacchinobros
@lupacchinobros 9 ай бұрын
I'm a July retiree....but I retired under TERA....so I can't complain....16.3 years of service but a pension and benefits of a 20 year retiree. Bwahahaha.
@the_bureaucrat
@the_bureaucrat 9 ай бұрын
The envy I have for you TERA types. When that was going on, I couldn't convince them to let me go.
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