Following the confirmation of the 2025 COLA updates back in October, The Senior Citizen’s League (TSCL) has released their initial prediction for the 2026 COLA just this past week. Here’s what Feds need to know.
The Senior Citizen’s League (TSCL) has forecasted that the 2026 Cost-of-Living Adjustment (COLA) will be approximately 2.5%, based on the most recent data from the Bureau of Labor Statistics. This would mirror the 2025 COLA, indicating relatively modest inflation in the year ahead. TSCL will continue to update this prediction monthly until the Social Security Administration (SSA) announces the official 2026 COLA in October 2025.
Federal retirees, including those who rely on Social Security, military pensions, and federal retirement plans, should keep an eye on this forecast as it may influence future benefit increases.
The Consumer Price Index for Urban Wage Earners (CPI-W), the key inflation measure used for COLA calculations, registered 2.6% for November 2024, marking the second month of the fourth quarter. This figure continues a trend of declining inflation, following a higher average of 3.2% in the first half of 2024, and dropping to an average of 2.5% in the third quarter—the period that directly impacts Social Security COLA calculations.
Key Insights for Federal Retirees:
- Inflation is stabilizing: Inflation, which had reached a peak of 9.3% in Q2 of 2022, has steadily decreased since then, and CPI-W inflation is now trending below 3% for two consecutive quarters (Q3 and Q4 of 2024). For federal retirees who rely on fixed-income benefits, this could bring some stability, though rising costs in other areas, like healthcare (I know you saw those premium increases for FEHB during open enrollment season), may still present challenges.
- Concerns About Rising Costs: A TSCL survey of over 3,000 seniors revealed that 69% worry about the persistent rise in living costs potentially draining their retirement savings and assets. For federal retirees, particularly those relying heavily on fixed income sources like CSRS/FERS pensions and Social Security income, this is a growing concern.
- Social Security and Benefits at Risk: The same survey found that 74% of seniors, including many federal retirees, are concerned about potential cuts to Social Security benefits in the future. Another 70% expressed worry over possible reductions in Medicare benefits. These fears highlight the need for federal retirees to stay informed about proposed legislation that could affect their benefits.
- Fixing Social Security's Finances: To address these concerns, 81% of survey respondents favored increasing taxes to shore up Social Security’s finances. Many supported proposals such as raising or eliminating the income cap for Social Security payroll taxes, which, in 2025, will be set at $176,100. Federal retirees should stay vigilant as such reforms could have long-term implications for their benefits.
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TSCL Executive Director Shannon Benton emphasized that while inflation may be cooling, the economic struggles for seniors are far from over. "Years of inadequate COLAs have left older Americans behind," she said, stressing the need for guaranteed minimum COLA increases of 3% to keep pace with real-world inflation, particularly in areas like healthcare and prescription drug costs.
If you're concerned that your income in retirement isn't keeping up with rising inflation and the increasing cost of living, now is the time to take action. Protect your financial future by working with a professional who understands the unique challenges faced by federal retirees.
Reach out to the team at Serving Those Who Serve for a personalized financial planning consultation. Our experts can help you navigate your benefits, adjust to changes in the economy, and ensure your retirement plan is on track. Let us help you create a plan that provides the security and peace of mind you deserve.
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Katelyn Murray, CFP®, ChFEBC℠, FBS®, CFT-1™: Relationship Team Lead & Financial Planning Expert
Katelyn is a financial advisor with over a decade of experience working with Feds to build a healthy, balanced relationship with money and to design and enjoy the retirement of their dreams. In addition to her CERTIFIED FINANCIAL PLANNER™ and Chartered Federal Employee Benefits Consultant℠ designations, Katelyn also holds a Master in Business Administration as well as a graduate certificate in financial psychology and behavioral finance. Her unique approach merges financial psychology with traditional wealth management expertise to create an integrated financial planning approach that helps clients make the most of the one resource they can’t get more of: time.
Here at Serving Those Who Serve, Katelyn serves as our Director of Relationship Management, mentoring our advisors and guiding our client experience. She also co-hosts The Fed15 podcast each week with STWS founder Dan Sipe.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
**Written by Katelyn Murray, CFP®, ChFEBC®, FBS®, CFT-1™, ECA. 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 Katelyn Murray 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. **
