Changing pension Inflation Index not changing resulting pension

I am trying to see the difference between a pension with Inflation Index of 2% (1% less than modeled inflation) vs. and a pension with 0% Inflation Index. When I changed the index from 2% to 0% the pension didn't change. Did I miss something or is this a bug?

Comments

dan royer's picture

That's a little confusing. The 0% means that it's not indexed to inflation at all: no COLA each year and thus it loses to inflation each year. Set it to 100% and it means you get a full COLA cost of living adjustment each year. If inflation is 3% and you want to model 2% increase, then that would be indexed 2/3 of inflation or 66% so you'd set that index to 66%. I hope that makes sense.

Thanks. But the help/instructions should be updated. I never thought it would work that way. The bad news is now I have to re-run my forecast. The good news is it will/should show my pension decreasing less in real terms over time (I thought I was putting in a 2% COLA; what it was actually calculating was 2% * 3% inflation rate = 0.06% increase).

dan royer's picture

Yes, OK, just reenter the pension and delete the old one. Then just create a new report. Sorry about that.