2025 brought volatility, layoffs, and whispers of recession that left many federal employees cautious. Now, as 2026 approaches, one question rises to the surface: Should I retire in 2026? The answer depends on how economic trends, policy shifts, and personal readiness align for you.
Pay Raises and COLAs: What They Mean for You
For active employees, annual pay raises can boost future retirement income by lifting the “high-3” calculation. Retiring too soon may cut off one more year of higher earnings that could meaningfully increase your pension.
On the other side, retirees depend on cost-of-living adjustments (COLAs). These adjustments typically trail inflation and, for new retirees, often start smaller than expected. Some employees who left in 2025 under early retirement offers are already feeling the lag because COLAs don’t kick in until age 62.
The timing of your exit plays directly into how well you capture the last of your peak earning years while positioning yourself for COLA growth. Federal retirement 2026 planning should include running the numbers both ways — retiring before the next raise or holding on to maximize your high-3.
Inflation and Market Volatility
Even modest inflation erodes purchasing power over time. Retirees who rely on steady income streams feel this most acutely, especially when markets fluctuate. The Thrift Savings Plan (TSP) complicates things further, as all distributions are made pro rata across your funds. That means you can’t just sell from funds that are up and protect investments that are down.
In a high-inflation environment, the G Fund may feel like a safe harbor, but it rarely outpaces the combined drag of inflation and taxes. The C Fund can provide long-term growth, but it also takes the brunt of market swings. Lifecycle (L) Funds spread risk by blending investments, though they will still rise and fall with overall market conditions. The key is to base your allocation on your financial plan and goals, instead of reacting to short-term market noise.
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Legislative and Policy Uncertainty
Changes in Congress, agency budgets, or benefit rules create real uncertainty. Healthcare coverage, contribution limits, and retirement eligibility could all be affected. You can’t predict which way policy will go, but you can prepare for more than one outcome.
Building flexibility into your plan — by holding liquid savings, diversifying your TSP allocations, and reviewing your Federal Employee Health Benefits (FEHB) options — helps you weather surprises without panic. Federal retirement 2026 planning works best when it includes “what if” scenarios. The more scenarios you plan for now, the less disruptive those policy shifts will feel when they arrive.
Balancing Risk and Readiness
Before filing your retirement paperwork, take stock of the basics. Do you have an emergency fund covering at least six months of expenses? Have you tackled high-interest debt? Are your TSP allocations aligned with your risk tolerance and income needs? Will you keep FEHB coverage into retirement?
Running projections with a fed-focused advisor can show how your pension, Social Security, and TSP withdrawals fit together. Personal factors — your age, years of service, health, and family obligations — matter just as much as the numbers on paper.
Deciding if 2026 Is Your Year
So, back to the primary question: “Should I retire in 2026?”
For some, it will be the right moment to step away with confidence. For others, waiting could create a stronger financial foundation. The difference often comes down to preparation. If you’ve been working through the numbers with a financial professional, built a comprehensive plan, and aligned your portfolio with your goals, you can retire on schedule without hesitation. If you haven’t, 2026 could be a risky time to guess your way through.
With the proper planning, retirement in 2026 can be a launchpad rather than a leap of faith. Reach out to the team at Serving Those Who Serve at [email protected] to explore your options and build a plan that supports the retirement you want.
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you're eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.
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. **
