The in box. Risky Business: Living In Our “Golden Years” Without The Gold.

It would be nice if all of us ended up living in a retirement world where it was always “Five O’Clock Somewhere” instead of “Zero – Dark -Thirty” everywhere.

 Jim Keating, DuPage Illinois Retired Teachers Association newsletter

Recently, the IRTA foundation sent out a letter saying that it pays the bills for “retired teachers who devoted their lives to teaching but cannot maintain the lifestyle dignity to which a retired teacher is entitled.” Most of us here in DuPage County may join them if the state legislature eventually eliminates our COLAs. That seems to be their goal. Ever wonder what life would be like if they actually did take away our COLAs?

Because we worked as educators we were paid less than others with the same educational skills, talents, and levels of creativity as we had. We probably retired with a less generous pension than they did too. That’s fine. Today, we are fine. We live in the greater DuPage area and probably have a pension similar to our neighbors,(solidly middle class for this area, our occupational skill level and level of education), and a COLA that allows us to maintain that buying power. Without the COLA we will have 55% of today’s buying power in 20 years  and 40% in 30 years. That’s called inflation risk. A  3% COLA reduces inflation risk a lot.

For a healthy couple living into your eighties is easily doable. According to the Society of Actuaries, there is a 52% chance that one or both of you will live to be 92 and a 36% chance that one will live to age 95. This is called longevity risk. Without the COLA you will die broke. Thank you for your service. Our COLAs prevent this from happening. With them you should live long and prosper. With a diminished COLA it may not happen.

If you or your spouse are not healthy though, there are other risks. The US spends more on health care per capita than any country in the world. On average a 65 year old couple will spend about $250,000 for out-of- pocket health care expenses in retirement.  This is another one of those little life risks, a health risk. And here is the worst case scenario: you die and your spouse loses half your pension as she or he grieves over your casket. A COLA would help the survivor make a go of it, but without it, it’s a disaster. We need to keep our 3% COLA.

It’s important to note here that the negative effects of a COLA loss won’t happen to DuPage retirees first. They will start with the 50% of TRS retirees living on the average pension of $48,842 this year. That’s about 50,000 of us. They will go down first and we will watch what happens. Then it will be our turn. “First they came for the communists, and I did not speak out – because I was not a communist, . . .” Well, you know the rest. A diminished COLA hurts the worst off of us first, but eventually will get us all.

A brave new world awaits us as we age. It would be nice if all of us ended up living in a retirement world where it was always “Five O’Clock Somewhere” instead of “Zero – Dark -Thirty” everywhere. It would be nice to have both Warren & Jimmy Buffett as our reference points and role models as we grow older but not up. Again, our COLAs will determine what will happen to us. We should do what we can to keep them at 3%. You know what to do, don’t you?