Plan Your Washington State Retirement with plain-English emails for PERS, TRS, SERS, and LEOFF members who want a reliable retirement paycheck. Get WA‑specific guidance on pension options, Social Security timing, tax-smart withdrawals and healthcare options - no spam, unsubscribe anytime.
Your pension COLA stops at 3%. Seattle inflation didn’t.
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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. The screen share that gives it away Neil pulls up his DCP account on our Zoom call and I can read the whole thing in about four seconds. He's 53. Water utility operations manager for a city on the west side, 24 years in PERS 2, planning to walk at 58. Between the DCP and an old IRA he's got a little over $800,000. About two thirds of the DCP sits in the Savings Pool Fund. He tells me that's deliberate. The pension is the plan, the DCP is the cushion, and he'd rather the cushion not bounce around. I've heard a version of that from a lot of people and I don't think it's a dumb sentence. It's just resting on a number he's never looked up. Nobody reads the cap Neil knows he gets a COLA. Almost everybody does. The cap is the part he hasn't read. If you're in a DRS pension plan, your annual adjustment is capped at 3%¹. The percentage comes from the Consumer Price Index for the greater Seattle area, and state law spells out which index gets used and how it's measured¹. That holds whether you retire in Spokane or Vancouver. Seattle's index sets your raise. DRS deserves credit for one feature here. When the index climbs more than 3%, the excess isn't lost. It gets banked and paid out in later years when inflation lands under 3%¹. A run of hot years followed by quiet ones can even itself out. That's better than a hard cap with nothing behind it, but it's still a ceiling. Twenty out of thirty-six The Office of the State Actuary publishes that Seattle CPI-W series going back decades². I pulled the annual changes from 1990 through 2025 and counted them. Prices rose more than 3% in 20 of those 36 years². Across the full stretch the index averaged right around 3% a year². Which is the cap, on the nose. Your pension's inflation protection was built to land on the long-run average and stop there. Cash went backwards in Washington Aswath Damodaran at NYU keeps a public dataset of annual returns on stocks, Treasury bonds and Treasury bills running back to 1928³. I lined his numbers up against the same Seattle CPI-W series the state uses to set your COLA. Say you put $10,000 into Treasury bills at the beginning of 1990. Cash, essentially. By the end of 2025 it had grown to roughly $26,700³. In 1990 purchasing power, that's about $9,300²ˏ³. Thirty-six years of perfect safety, and it finished below where it started. The same $10,000 in the S&P 500 grew to about $388,000, or roughly $136,000 in 1990 dollars²ˏ³. Stretch the window and the gap turns absurd. One hundred dollars in the S&P 500 at the start of 1928 was worth about $1.16 million at the end of 2025. The same hundred in Treasury bills came to about $2,600³. That leaves one account to do the growing Social Security adjusts for inflation too⁴. Between the pension and Social Security, Neil has a stack of income engineered to hold its purchasing power steady. Holding steady isn't growing. Growth has to come from the third bucket. For Neil that's the DCP and the IRA, which is the bucket sitting in cash. There's a second thing the pension is doing that gets missed. Neil already owns a large, guaranteed income stream that adjusts for inflation every year. In portfolio terms that does the same job a heavy bond allocation does. He's conservative before he picks a single fund. Piling cash on top of that buys the same protection twice, using money that has 30 years of work ahead of it. He has options inside the plan. The DCP build-and-monitor lineup runs from the Savings Pool Fund and the Washington State Bond Fund on the stable side through U.S. Large Cap, Global Equity, U.S. Small Cap Value and Emerging Markets index funds, all selected by the Washington State Investment Board⁵. Why I still keep years of it in a “War Chest” None of this means Neil should dump everything into stocks. The approach I use is a war chest. We generally put approximately 5 years of planned portfolio withdrawals held in high-quality short-term bonds for retirees. That money has one job, which is making sure a bad year never forces a sale. Everything past the war chest gets invested for growth. Where to start Log in and find out what your DCP is invested in. A lot of people are guessing, and plenty of balances are still sitting in whatever got picked twelve years ago. Then write down what you expect to pull from your portfolio in each of your first five years of retirement. Not a percentage. A dollar figure. That's your war chest. Everything past it is the money that has to clear 3%. Neil didn't move a dollar on our call. He went and read the COLA page. That's usually where it starts. If you’re concerned about your current financial plan and would like to explore professional help, consider reaching out. I specialize in helping Washington Public employees who are nearing retirement or are retired, reduce taxes, maximize pensions, and retire stress-free.
No sales pressure. No obligations. Just professional guidance to help you make the best decision for your financial future. -Seth Deal Sources
Seth Deal is an investment advisor representative of LifeFocus Financial Advisors, LLC, a registered investment adviser. This email is for informational purposes only and does not constitute a recommendation to buy or sell securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance.
P.S. If you haven't joined one of my monthly webinars, I would love to have you be on the lookout for that link. If you would like to view the recordings and slide decks, here's a link.
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Plan Your Washington State Retirement Newsletter
Plan Your Washington State Retirement with plain-English emails for PERS, TRS, SERS, and LEOFF members who want a reliable retirement paycheck. Get WA‑specific guidance on pension options, Social Security timing, tax-smart withdrawals and healthcare options - no spam, unsubscribe anytime.
Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Twelve years is a long bridge Picture a 55-year-old civil engineer with a county public works department. He’s in PERS 2 with 27 years of service, and he plans to retire at 58. His wife is 54 and works as a payroll specialist for a school district in SERS 2. Between their DCP accounts and IRAs, they’ve saved about...
Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Picture a 54-year-old budget manager at a state agency. She's in PERS 2 with 27 years of service, and she's aiming to retire at 58. She and her husband have about $750,000 saved between her DCP account and their IRAs. They give every year. Each December she writes a $1,500 check to their church, and she supports a...
Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. A decision two decades away Picture a 54-year-old budget analyst for a Washington county. She has 26 years in PERS Plan 2. Her husband is 55 and works maintenance for a school district in SERS Plan 2. Between them they have about $750,000 saved, most of it in pretax DCP. They want to retire at 58. To her, required...