Pension with a future COLA

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My wife's State Teachers Pension is fixed until 2019 when the first COLA will be given and annually thereafter. Any suggestions as to how to accommodate that as it appears that I can only enter whether it does (and how much) or does not keep up with inflation. Thanks.

Comments

The easiest way is to input a series of annual lump sum pension values (inflation adjusted to drop slightly over time). Do this until 2018. Then use the 2018/19 value and input a pension with annual benefits that has a COLA.

Best,
Brian

Thanks for the quick and helpful response. Would the lump sum pension values be entered as special receipts and then use the pension screen effective 2019?

You could do it the special receipts way, but I'd just use the pension tab since the income is all from a pension.

There appears to be a limit of 6 entries into the pension tab. If you use 2015-2018 for lump sums, then annual pension starting in 2019, you'll be fine.

Best,
Brian

Worked like a charm! Thank you for your help.

Best wishes,
Fred

If the tax treatment of an annuity is the same as that of a pension, an alternate approach is to enter the first few years as a fixed annuity in dollars guaranteed for 4 years, to stop after the guarantee period. Then create a pension starting in 2019, the annual amount equal to the initial amount + one year's COLA. Set the COLA and survivor benefits to match those of the pension.

That approach requires only one line on the annuity tab and one line on the pension tab.

Chris

In case you try the annuity approach, remember that the assumptions tab has a default load of 15% for annuities so this would need to be changed or it will skew the results.

Best,
Brian

Ah, true. If not using other annuities, it's okay to set it to 0; but if you do have annuities in your plan, that's not appropriate.

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