The Cost-of-Living Adjustment (COLA) is a yearly increase to federal retirement benefits, designed to keep up with inflation. For retirees, it’s a key factor in how well your income holds up over time. Those under the Civil Service Retirement System (CSRS) usually receive the full COLA. Retirees under the Federal Employees Retirement System (FERS) often get a reduced version, depending on the inflation rate, so even a small change can have a real impact.
The 2026 COLA estimate for federal retirees is already drawing interest. With costs still climbing, next year’s adjustment could affect how much you’ll have to work with. Knowing what’s ahead can help you prepare.
Early Predictions for the 2026 COLA
Early projections suggest the 2026 COLA could land around 2.6%, a modest federal retirement cost-of-living adjustment compared to the higher increases seen in recent years. That number is still preliminary and will depend on inflation trends over the next few months.
COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Specifically, the government compares the average CPI-W from July through September 2025 to the same period in 2024. If prices continue to rise, the final COLA could end up higher. If inflation cools, it may come in lower.
With several months of economic data still ahead, this estimate remains a moving target. Retirees should view the early forecast as a planning tool, not a guarantee.
What It Could Mean for CSRS and FERS Retirees
How much a retiree receives from the annual COLA depends on their retirement system. For those under CSRS, it’s straightforward—eligible retirees typically receive the full COLA, whatever the final percentage turns out to be.
Retirees under FERS often receive a reduced version of the COLA, known informally as the “diet COLA.” They get the full amount if the COLA is 2% or less. If it falls between 2% and 3%, they receive 2%. And if it’s over 3%, they get 1% less than the full rate.
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Using the current 2026 estimate of 2.6% as an example:
- A CSRS retiree with a $50,000 annuity would see an increase of $1,300.
- A FERS retiree with the same annuity would see just $1,000 due to the formula capping their increase at 2%.
The gap may seem small year to year, but it adds up—especially over a long retirement.
Planning Ahead: What Federal Retirees Should Consider
COLAs help, but don’t always keep up with real-life expenses—especially for retirees under FERS who may not get the full increase. It’s smart not to count on COLAs to cover every rise in cost.
A CERTIFIED FINANCIAL PLANNER™ professional would recommend building flexibility into your income plan. That’s why building in some flexibility is important—so you’re not stuck if prices rise faster than your benefits. Take time to review the key pieces of your income:
- Annuity payments: Are they still enough to meet your core expenses?
- TSP withdrawals: Could shifting the timing or amount help your savings last longer?
- Spousal income: Make sure any Social Security, survivor benefits, or second pensions are part of the picture.
Small adjustments now can make a big difference later.
Staying Ready, Year After Year
While COLA estimates are useful for planning, they’re just that—estimates. The final number can shift with the economy, and even then, not all retirees receive the full adjustment. That’s why building annual COLA reviews into your broader retirement planning routine is wise.
Check in each year, revisit your income strategy, and adjust where needed. Over time, these small reviews can make a big difference in maintaining stability and peace of mind.
Need help making sense of how the numbers fit into your retirement plan? Reach out to the team at Serving Those Who Serve at [email protected] for guidance tailored to your unique situation.
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 Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
