Inflation in recent years has gone up so much faster than federal pay that many long-service bureaucrats who retire this year will get pensions one-third smaller than those being drawn by person who retired from the same kind of federal job in 1973.
The topsy turvy situation is the result of political "caps" that have held down federal salaries -- supposed to be on a par with industry pay -- at a time when retired civil servants are indexed to the cost of living (COL).
Many federal and postal workers who retired as far back as 1965, when salaries were much lower, are also getting bigger retirement checks (because of inflation-triggered raises) than persons who will retire from the same jobs this month.
The Reagan administration is concerned about the situation. Office of Management and Budget chief David Stockman cited the pay-retirement flip-flop at House hearings earlier this week. He is advocating limiting federal retirees, who now get COL adjustments every six months, to a single raise each year.
Data worked up by the Office of Personnel Management shows the dollar edge that inflation-triggered raises have given long-time retirees over people planning to quit this year:
The example used in each case is a civil servant who retired after 30 years service in the fourth pay step of his/her grade, at age 55 or older.
A Grade 5 worker retiring in May 1973 now gets -- thanks to COL raises -- an annuity of about $9,500. A similar employe retiring today from the same grade level job will get a pension of only $6,720. Retirement benefits are based on length of service end salary for the highest three years.
The May 1973 Grade 7 retiree in the example is getting about $11,700 today. The May 1981 Grade 7 retiree will get about $8,300.
An employe retiring today from Grade 11 is due an annuity of $12,312. If he could have retired from the same job, at the same grade, back in 1973, his annuity today would be just over $17,300. Even the 1965 retiree, at $15,600, gets more in retirement income than the 1981 retiree at the same grade.
An individual retiring at Grade 15 this month can expect an retirement income of $24,384 according to the OPM data. The same person who retired in 1973 gets just over $33,000 and the 1965 retiree at the same grade and service level gets $28,272.
Retirees have gotten two COL raises a year since 1977 while active duty workers have gotten one catch-up-with-industry raise each year, although that was frequently shaved by presidents for economic and political reasons. This is what they look like:
Retiree raises since 1973: 6.1 percent in 1973, 5.5 percent in January 1974, 6.3 percent in July 1974, 7.3 percent in January 1975, 5.1 percent in August 1975, 5.4 percent in March 1976, 4.8 percent in March 1977, 4.3 percent in September 1977; then March and September raises each year of 2.4 percent and 4.9 percent in 1978; 3.9 percent and 6.9 percent in 1979; 6 percent and 7.7 percent in 1980 and 4.4 per cent last March.
Federal pay raises during the same period look like this: A 4.77 percent boost in 1973, 5.48 in 1974, 5 percent in 1975, 5.17 percent in 1976 7.03 percent in 1977, 5.46 percent in 1978, 7.02 percent in 1979 and 9.12 percent in October 1980.