Retirement Payments Set to Rise: Breaking Down the 2026 COLA
Retirement Payments Set to Rise: Breaking Down the 2026 COLA
By Ralph R. Smith
The 2026 COLA has been announced after being delayed by the government shutdown. How much is it and who will receive it?
Inflation Is Higher Than Expected in Latest Data
The Bureau of Labor Statistics (BLS) released the inflation data for September 2025 on October 24th. This means it is possible to announce the 2025 cost-of-living (COLA) increase for the coming year.
Starting in January 2026, the COLA increase will be 2.8%. As explained below, the amount of the increase will vary between those receiving Social Security payments, CSRS annuity payments and FERS annuity payments. The 2.8% increase is higher than had been projected as late as last month. The Senior Citizens League had projected the 2026 COLA for 2026 would be 2.7%, so the 2.8% increase for 2026 was slightly higher than had been anticipated due to the latest inflation data.
Overall, consumer prices rose 3.0% in September from a year earlier, according to BLS, which is higher than August’s increase of 2.9%.
The September inflation data were delayed by the government shutdown and released on October 24, 2025. With this information now in hand, it is possible to determine the cost-of-living adjustment (COLA) for 2026. This is important as the COLA applies to Social Security payments and to federal government annuity payments.
2026 Increase Compared to 2025
In 2024, there was a 2.5% COLA increase. This was higher than 2.5% of 2025 but lower than the 2024 increase of of 3.2%. Over the last decade, the cost-of-living adjustment (COLA) increase has averaged about 3.1%. 
The 2026 increase will be applied to those receiving Civil Service Retirement System (CSRS) annuities, military retirement annuities, and Social Security benefits. In 2025, there was a 2% COLA for Federal Employees Retirement System (FERS) annuities, effective in January 2025.
The reason there is a difference between CSRS and FERS annuity payments is due to FERS employees receiving Social Security benefits as well as an annuity. Those under CSRS do not receive Social Security from their government employment. The 2026 payments will have the same differential. That is, those under CSRS will receive the 2.8% benefit. FERS annuities will increase by 2% but will receive the full increase for Social Security payments.
Here is how this breaks down:
| Retirement Type / Benefit | Applicable COLA Formula | 2026 COLA Increase | Notes |
|---|---|---|---|
| CSRS (Civil Service Retirement System) | Full CPI-W increase | 2.8% | Receives the full COLA because CSRS is fully indexed to inflation. |
| FERS (Federal Employees Retirement System) | If CPI-W > 2% and < 3%, COLA = 2.0% | 2.0% | FERS COLA is reduced under current law (5 U.S.C. § 8462(b)(1)). |
| FERS + Social Security | FERS annuity = 2.0%; Social Security = full 2.8% | 2.0% (FERS) + 2.8% (Social Security) | Social Security benefits always receive the full COLA, separate from FERS |
One other item of interest is that starting this month, about 400,000 people will still receive paper checks. SSA stopped mailing paper checks on September 30th following the executive order issued in March 2025 entitled Modernizing Payments to and From America’s Bank Account.
Calculating the COLA for FERS
There has been publicity about the differences in annuity payments for federal retirees under CSRS and FERS. Often, the publicity highlights or implies the difference as an unfair advantage for FERS employees.
Here is how the two annuity payments are calculated.
- For Federal Employees Retirement System (FERS) or FERS Special benefits, if the increase in the CPI is 2% or less, the Cost-of-Living Adjustment (COLA) is equal to the CPI increase.
- If the CPI increase is more than 2% but no more than 3%, the Cost-of-Living Adjustment is 2%.
- If the CPI increase is more than 3%, the adjustment is 1% less than the CPI increase. The new amount is rounded down to the next whole dollar.
- To get the full COLA, a retiree or survivor annuitant must have been in receipt of the payment for a full year.
- If a person has not received the payment for a full year, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they have received benefits. COLAs were first prorated in April 1982.
- Adjustments to benefits for children are never prorated.
- Federal Employees Retirement System (FERS) and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements.
- FERS disability retirees get the adjustment, except when they are receiving a disability annuity based on 60% of their high-3 average salary.
- Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA calculation.
This table illustrates how this works:
| If the CPI is: | Then the COLA is: |
|---|---|
| <= 2% | COLA = CPI increase |
| > 2% and <= 3% | COLA = 2% |
| > 3% | COLA = CPI – 1% |
The Office of Personnel Management (OPM) explained the differences in this way back in June 1987 when describing the differences between the new FERS system and the CSRS system that had been in effect for a number of years:
CSRS provides better cost-of-living adjustments (COLAs) than FERS does. CSRS COLAs begin right away and they match the rate of inflation completely.
FERS COLA do not begin until age 62, even if you retire earlier. FERS only matches the rate of inflation completely if it is 2 percent of less. If inflation is higher than 2 percent, the FERS COLA will usually be 1 percent less than the rate of inflation. Social Security provides COLAs that match the rate of inflation completely, bug again, they don’t start until you are 62, and Social Security is only part of your total FERS benefit.
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