COLA: The Bankruptcy Beverage

When COLA (automatic, annual cost-of-living adjustment) payments are combined with normal increases in retiree populations the mathematical progression seems to lead inevitably to bankruptcy without any other destination. Below are my calculations of a 3 percent COLA interacting with a 4 percent increase in retirement populations. If you start by paying a pension of $1,000 to 1000 retirees, the annual payment is $1,000,000. By the 12th year payments will have doubled and topped $2,000,000.