The last cost of living increase that was granted to PSERS retirees by the state legislature was in 2002. That’s sixteen years ago. But with the increase in the multiplier from 2.0 to 2.5 a number of years ago, it seems that COLA’s might be thing of the past. And, don’t forget the financial pressure that PSERS now faces due to the change that was brought on by Governor Ridge as a political gesture, not one that was necessarily actuarially sound. Don’t forget the financial crisis came on the heels of the multiplier change as well which had profound effects on the pension fund!
So what this likely means is that retiring teachers need to consider how they are going to keep pace with inflation in retirement years, something they haven’t had to worry about while working and that the legislature helped offset in the past. But, even when the state legislature did boost up the pensions it was about one-half of what the actual average cost of living was, which is about 3.28% over the past thirty years.
So, how does a retired teacher keep up? By making sure they don’t invest their lump-sum and other investments too conservatively in retirement! It’s important to develop a personal asset allocation policy for your retirement years. That policy should be the guiding light and will ensure that you keep enough invested in risky asset classes to help you keep up with inflation. CD’s for everything might not be a good policy unless you want to find yourself behind the eight ball ten or twenty years down the line!