The 3.2% Cost-of-Living Adjustment (COLA) will apply to CSRS and Social Security. FERS annuitants will see a 2.2% adjustment.
A little higher than the 3.0% predicted at the end of August, the Social Security Administration recently announced next year’s COLA for Social Security benefits will be 3.2%. This means the COLA for federal retirees who receive a CSRS or CSRS-offset pension will also a 3.2% boost. Because those who retired under FERS get 1% less when the annual COLA is 3% or higher, income distributed to FERS retirees will see an increase of 2.2%. The upcoming adjustment is not as high as the previous two years: 5.9% (2022) and 8.7% (2023). However, it is still the third highest in the past decade. The 2012 COLA was 3.6%.
What if I Retired This Year?
While social security recipients receive the full adjustment even if they first claimed retirement benefits during the same calendar year, FERS and CSRS annuitants who retired in 2022 will see the upcoming COLA prorated. For instance, if you retired in January 2023, your pension will see 11/12ths of the 3.2% (CSRS) or 2.2% (FERS). Retiring in February would mean 10/12ths of the adjustment can be expected, and so on.
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It is also important to remember that other that FERS retirees with special provisions or under disability, there is no COLA for FERS payments if you are not yet age 62. If you turned 62 this year, but have been retired for the full year, you can expect the full COLA and not a prorated one.
How is COLA Determined?
The annual cost-of-living adjustment is calculated using the CPI-W index (consumer price index for urban wage earners and clerical workers) over the last three months of a given fiscal year. Going off the CPI-W, inflation for July was 2.6%, 3.4% for August, and 3.6% in September. Averaging these three numbers is what resulted in a 3.2% COLA for 2024.
2024 Medicare B Premiums
The premiums for Medicare B are also set to increase 5.94% to $174.70 monthly. As these premiums are deducted directly from social security, this actually offsets the 3.2% increase so social security checks will actually decrease by a net -2.74% if enrolled in Medicare part B. Similarly, FEHB premiums are increasing by an average of 7.7%.
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
