Cost of Living Adjustment (COLA) Questions
I hear that the best time of year to retire is on or before April 1 because I will be eligible to receive the cost-of-living adjustment on April 1. Is this true?
Possibly. The yearly COLA of up to 3% is credited to all members who retire on or before April 1 of each year. Many members take advantage of the April 1 COLA by retiring on or before that date. It is best to consult with a Retirement Benefits Specialist as factors like birth date and age are also important in choosing a retirement date.
What is a COLA Bank?
A COLA Bank is established for each retiree when the amount of the annual comparison for the Bureau of Labor Statistics Consumer Price Index (CPI) is greater than the maximum amount of COLA (3%) that can be granted by the Board of Retirement.
The difference between the maximum amount of COLA and the CPI is credited to each retiree’s COLA bank. The COLA Bank is used to supplement any future COLAs whenever the amount of COLA approved by the Board is less than the 3% maximum amount allowed.
What is COLA and how is it determined?
COLA stands for cost-of-living adjustment. It is an annual adjustment to your retirement benefit to offset a change in purchasing power, as measured by the Bureau of Labor Statistics Consumer Price Index (CPI). Each year the Board of Retirement determines the amount of COLA, if any. The maximum amount of COLA that can be applied to a benefit is 3% per year and is effective April 1.