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How does the Cost-of-Living Adjustment (COLA) work for Washington State retirees? In this episode of the Washington Retirement Planning Podcast, we explain how COLA can increase your pension over time, how annual adjustments are calculated, which pension plans qualify, and when you can expect your first increase.
You’ll learn how inflation affects your annual adjustment, why the increase is generally capped at 3%, and how Washington’s COLA banking system can help account for inflation above that limit. We’ll also cover the timing rules that determine when you become eligible for your first adjustment after retirement.
Later in the episode, we answer a listener question from a Washington State employee with 32.5 years of service who is considering purchasing five additional years of service credits for approximately $230,000. Should they use their deferred compensation to buy service credits or keep investing the money?
We walk through the trade-offs, comparing potential pension increases with investment income and the guaranteed income available through a Plan 3 or other retirement-system annuity. We also explain why the decision isn’t just about calculating a break-even point: liquidity, survivor benefits, market risk, and the desire for a predictable retirement paycheck all matter.
If you’re a Washington State employee planning for retirement, this episode will help you better understand your pension’s COLA and evaluate important decisions about maximizing your retirement income.
00:00 Intro
03:13 How COLA Works in WA State
04:36 COLA Banking and Inflation
05:43 Should You Buy Additional Service Credits?
08:14 Comparing Service Credits With Investing
09:27 Understanding Retirement-System Annuities
11:37 Guaranteed Income vs. Investment Flexibility
12:08 The Risks of Relying on Investments for Retirement Income
14:28 Making the Right Choice for Your Retirement
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DISCLAIMER
**Advisory Services offered through Intirety, LLC a registered investment adviser. Intirety LLC and Scenic Financial are not associated with the Washington State Department of Retirement in any way. Scenic Financial makes content available as a service to its clients and other visitors, to be used for informational purposes only. While our best intentions are to provide accurate and timely information, you should always consult with retirement, tax, and legal professionals prior to taking any action. 🕸️
