I have been a firefighter paramedic for 7 years. In order to vest in the state pension I need to stay 3 more years. I would be eligible to draw a pension at age 60 (I am currently 38 years old) and my monthly benefit would be around $1100 per month until my death.
My question is : should i go ahead a start a new career or wait 3 years in order to vest in my state pension ?
That $1100 will be worth more when you claim it, since it's COLA'd.
Well, it won't be worth
less than it does now because it's COLA'd. But it's buying power won't be increasing beyond the cost of living, so most would say its worth is not increasing. If it wasn't COLA'd, it would be worth less due to not keeping up with the cost of living. The COLA/no COLA is an important distinction because we can't predict long-term inflation with much accuracy.
The worth of something is how many hours of labor or quantity of goods it can be traded for. Today, $1100 buys 250 Big Macs, at the cost of $3.99 each. It's gross to think of using this money to eat 250 Big Macs each month, but it's a good illustration (with useful carry over to economic studies*). Using your assumptions for cost of living increases until 2043, each Big Mac will cost $4.97, and this same pension will buy 250 Bid Macs each month.
It's not useful for us to think of this as a $1369 per month pension because the majority of our experiences with pricing are set to today's prices. With 2% inflation, this pension would be $1700 per month, with 3% inflation it's $2100 per month, and with 6% inflation (within the realm of possibilities) it's $3964 per month. That sounds like a lot! But in terms of buying power, it'll still buy 250 Big Macs each month. The thought of a Big Mac selling for $15.86 just 22 years from now seems gross since that's what a nice steak dinner costs around here (in today's pricing), but OP won't have the choice between a steak meal for 2021 prices and a fast food burger for 2043 prices.
This is why the COLA/no COLA distinction is important. Without the promise of a cost of living adjustment, we can't be sure how much buying power the pension is actually going to provide, and we'd be forced to discount it. A non-cola pension that provides steak meals today would provide only Big Macs in 2043 if we experienced 6% inflation.
*There's a number of studies that look at the cost of this fast food item across time, and across different parts of the world. It helps that it's a standard type of item that can't be hoarded like gold or stamps, and includes labor, and energy components, so it's tracked inflation and buying power fairly accurately.
