10 months ago
This May, all CalPERS retirees who retired in 2021 or earlier will receive an increase to their cost-of-living adjustment (COLA). This is a result of the annual rate of inflation measured by the Consumer Price Index (CPI-U) that was 8% for 2022.
Most state and all school agencies contract for a 2% per year COLA, and public agencies can contract for a 2%, 3%, 4%, or 5% per year COLA. Currently, 95% of CalPERS retirees have a 2% COLA.
Over the last 40 years (1983-2022), the inflation rate has averaged 2.82% and the long term (1965-2022) inflation rate has averaged 4.02%. The 8% inflation rate this year will be used in calculating the 2023 COLA for CalPERS retirees and will be reflected on your May 1, 2023, retirement checks.
Find more details about your 2023 COLA, how it’s calculated, and frequently asked questions on our website.
Did You Know?
The COLA is a benefit that ensures your value of money at retirement keeps up with the rate of inflation. For a one-minute overview, access our CalPERS Quick Tip: Cost-of-Living Adjustment video.
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The article you provided delves into the Cost-of-Living Adjustment (COLA) for CalPERS (California Public Employees' Retirement System) retirees, specifically those who retired in 2021 or earlier. This adjustment is influenced by the annual rate of inflation measured by the Consumer Price Index (CPI-U), which stood at 8% for the year 2022. Let's break down the key concepts and related information covered in the article:
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Cost-of-Living Adjustment (COLA): This is an annual increase in retirement benefits intended to help offset the effects of inflation. COLA adjustments ensure that retirees' purchasing power remains relatively stable over time.
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Consumer Price Index (CPI-U): This index measures the average change in prices paid by urban consumers for a basket of goods and services. It serves as a benchmark for calculating inflation and determining adjustments in various financial instruments, including retirement benefits.
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Inflation Rates: The article provides historical data on inflation rates. Over the last 40 years (1983-2022), the average inflation rate was 2.82%, while the long-term rate (1965-2022) averaged 4.02%. Understanding historical inflation trends is crucial for predicting future purchasing power and planning retirement income.
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Contracted COLA Rates: Different state and school agencies may have contracted for various COLA rates—2%, 3%, 4%, or 5% per year. The majority (95%) of CalPERS retirees currently have a 2% COLA, highlighting variations in benefit structures among retirees.
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Impact on Retirement Checks: The 8% inflation rate in 2022 will be used to calculate the 2023 COLA for CalPERS retirees, affecting the May 1, 2023, retirement checks. This showcases how changes in inflation rates directly influence pension payments.
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Value of COLA: The article emphasizes the significance of COLA, ensuring that retirees' purchasing power keeps pace with inflation, preserving the value of their retirement income.
Retirement planning involves considering various factors like inflation, investment strategies, and the impact of COLA on pension income to secure a comfortable retirement. It's essential to monitor inflation trends and understand how they affect retirement benefits to make informed financial decisions.
If you seek further information or have specific questions about retirement planning, COLA adjustments, or related financial topics, feel free to ask for detailed guidance.
