Hi
I am trying to model the inflation adjustment of a CALSTRS California teachers' pension in Pralana Gold but I am not sure how to do it.
CALSTRS has a complicated way of providing inflation adjustments. There are two parts. First, they guarantee a 2% simple annual increase starting the first September one year after your first payment. This 2% is not compounded. (ie, if you had a $100 pension, each year you would get an additional $2). But the second part of their adjustment is to guarantee that your "purchasing power" stays within 85% of the original amount. They judge purchasing power by a California urban CPI.
What I have done with other calculators is to divide the pension into two parts worth 85% and 15% of the total. The 85% I give a COLA to and the 15% I assign as a non-cola pension. I tried to do this in Pralana gold but could not figure out how to make one pension have a cola and the other not. Is there a way to do that? Otherwise, could you suggest another method for modeling the pension?
Thanks,
Victor
Victor,
Yes, just use the Annual % Increase field. Leave that field blank for the pension with no COLA and set it to your desired COLA value for the other pension. If you wanted it to track inflation, you'd set the COLA value equal to the inflation amount. Then, in terms of today's dollars you'd see it remain a constant value going forward, indicating that it retains its purchasing power.
Stuart
Thanks, that's simple enough.
Victor
