I am trying to figure out how to model a pension from Federal Employees Retirement System (FERS). My question relates specifically to the annual Cost of Living Adjustment (COLA). The COLA is based on inflation and works in the following manner: If inflation is <=2%, then COLA matches inflation. If inflation is >2% and <=3%, then COLA is 2%. If inflation is >3%, then COLA will be inflation minus 1%.
Is it possible to model this COLA formula in Pralana?
@accurate3567 No, it requires you to specify the annual increase amount directly, and that amount is independent of inflation. If you want to explore high-inflation scenarios, you will have to manually change the annual increase amount of your pension to be inflation minus 1%.
Stuart
@accurate3567 I had the same issue when I first started to model my situation. I did the following: On the Excel based version of the program you can go to Financial Assets > Historical Data page. There you will find inflation data from 1928 to the present. Drop that data into a spreadsheet and determine COLA for each year based on the FERS algorithm. Average the data and use that for your specified annual increase for your pension. I came up with 2.8%. Also, the COLA only kicks in for FERS after age 62. If that is your situation, then you are good to go.
