Pension COLA variables

The planner offers plenty of flexibility and can handle many complicated real-world scenarios, but sometimes it can be tough to figure out how to do it. Check out this forum for discussion of how to model things like selling a house, long-term care expenses, and much more.
Post Reply
arcticman
Posts: 2
Joined: Tue Nov 26, 2013 5:27 am

Pension COLA variables

Post by arcticman » Tue Nov 26, 2013 5:46 am

When specifying pensions with a COLA... is the planner assuming the retirees pension plan increases the paid benefit equal to the assumed inflation rate entered in the summary view?

e.g. if I use an inflation rate of 3% in the Planner... is the Planner increasing the pension benefit by 3% to match inflation?

Below is how our pension plan pays COLA. How do I account for this in the Planner?

75% of the cost of living increase in the preceding calendar year or 9%, whichever is less, if the recipient is at least age 65

or

50% of the cost of living increase in the preceding calendar year or 6%, whichever is less, if the recipient is at least age 60 on July 1.

We are retiring at 60.

Thanks for the planner!

User avatar
admin
Site Admin
Posts: 79
Joined: Thu Feb 28, 2008 5:27 pm

Re: Pension COLA variables

Post by admin » Tue Nov 26, 2013 8:49 am

In the current version of the planner (v4-00-xx), pension with cola cashflows will exactly keep up with inflation.

The next release of the planner has some extra capability for handling colas. In addition to no cola and cola, the planner will offer a 'fixed cola' option. With this option you can specify the annual percentage increase for the cola.

To handle your situation in the next release, you'd use your expected inflation rate to pre-calculate the fixed cola for each of the two phases of the pension (eg expected inflation * .5, expected inflation * .75). Then enter 2 pension cashflows in additional inputs (one for 60-65, one for 65+) using the fixed cola percents you pre-calculated.

The next release of the planner (v4-01-xx) is still in testing, but if you'd like to try it out (standalone version only), please send an email requesting it to info@flexibleRetirementPlanner.com

Jim

arcticman
Posts: 2
Joined: Tue Nov 26, 2013 5:27 am

Re: Pension COLA variables

Post by arcticman » Tue Nov 26, 2013 5:11 pm

Thank you Jim

I sent an email requesting the beta version.

Cheers

Post Reply

Who is online

Users browsing this forum: No registered users and 3 guests