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If you’ve been checking your bank account this January, you’ve likely already seen the shift. Money is tight for everyone right now. For federal retirees and those eyeing the exit door, the 2026 COLA for federal employees update isn’t just a headline—it’s the difference between keeping up with the grocery bill or falling behind.
Honestly, the numbers this year are a bit of a mixed bag.
The Social Security Administration (SSA) and the Office of Personnel Management (OPM) have finalized the rates. If you’re under the Civil Service Retirement System (CSRS), you’re looking at a 2.8% increase. If you’re under the Federal Employees Retirement System (FERS), things are a little different. You’re getting 2.0%.
Why the gap? It feels unfair, doesn't it? Well, it’s basically built into the law, and that’s where things get complicated.
Why FERS and CSRS Don't Get the Same Raise
It’s the question everyone asks. You worked the same years, served the same government, yet the check looks different.
The 2026 COLA follows a "diet COLA" formula for FERS. When inflation—measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—lands between 2% and 3%, FERS retirees are capped at exactly 2.0%. Since the CPI-W average for the third quarter of 2025 came in at 2.8% compared to the previous year, CSRS retirees get the full 2.8%, while FERS folks hit that 2.0% ceiling.
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It’s a gap that groups like NARFE (National Active and Retired Federal Employees Association) have been fighting for years. They call it the "FERS COLA disparity."
For a retiree with a $3,000 monthly CSRS annuity, that 2.8% means an extra $84 a month. A FERS retiree with the same $3,000 annuity only sees a $60 bump. Over a decade, that's not just pocket change. It’s thousands of dollars of lost purchasing power.
The Math Behind Your Money
The government doesn't just pull these numbers out of a hat. They compare the average CPI-W from the third quarter (July, August, and September) of the current year to the third quarter of the last year a COLA was determined.
For 2026, the base was the 2024 third-quarter average of 308.729. The 2025 third-quarter average jumped to 317.265.
The calculation looks like this:
$$(317.265 - 308.729) / 308.729 \times 100 = 2.8%$$
What About Active Employees?
If you’re still clocking in every day, the 2026 COLA for federal employees update affects you differently. Technically, "COLA" refers to retirees. For active-duty feds, we talk about the General Schedule (GS) pay adjustment.
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President Biden signed the executive order late in 2025, and it’s a bit of a letdown for some. Active federal employees are seeing a 1.0% across-the-board pay increase for 2026.
Wait, only 1%?
Yeah. While retirees are getting 2.8% to keep up with inflation, active employees are getting less than half of that. There’s no additional locality pay increase this year either—percentages are staying at 2025 levels. The only real "winners" in the active category are certain Law Enforcement Officers (LEOs), who are seeing an additional 2.8% bump on top of the base 1%, totaling a 3.8% increase due to new special rate tables.
The Medicare "Gotcha"
You’ve got to look at the net, not the gross.
Most federal retirees have their Medicare Part B premiums deducted directly from their Social Security checks. For 2026, those premiums have climbed. If your COLA gives you an extra $50, but Medicare takes an extra $18, you’re only "up" $32.
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It's a treadmill. You’re running faster just to stay in the same place.
The 2026 COLA for federal employees update also comes on the heels of a chaotic year. Remember the government shutdown back in October 2025? It actually delayed the official COLA announcement. Usually, we know the number by mid-October. This time, the Bureau of Labor Statistics (BLS) couldn't release the data until October 24th because of the funding lapse.
Key Dates to Watch in 2026
- January 1, 2026: The new COLA officially took effect.
- January 2, 2026: Most retirees saw the first increased payment (though it depends on your specific pay cycle).
- January 11, 2026: This was the start of the first full pay period for active employees, meaning the 1.0% raise should show up in the late January or early February paychecks.
- April 2026: FECA (Federal Employees' Compensation Act) recipients will see their specific 2.8% adjustment.
Is This Enough to Beat Inflation?
Probably not.
The Senior Citizens League has been vocal about how the CPI-W doesn't accurately reflect what seniors actually spend money on. It weights things like gasoline and electronics heavily. Seniors spend more on healthcare and housing—two things that have skyrocketed lately.
Some lawmakers are pushing the Equal COLA Act. The goal is to make FERS and CSRS adjustments identical. Will it pass in 2026? It’s a steep climb in a divided Congress, but the pressure is mounting as the "FERS generation" becomes the majority of the federal retiree population.
Actionable Steps for Your 2026 Budget
- Check Your LES/Annuity Statement: Don't just assume the math is right. Log into OPM’s "Services Online" or your agency's payroll portal. Verify the 2.8% (CSRS) or 2.0% (FERS) increase is reflected.
- Adjust Your Withholding: A bigger check means a bigger tax bill. If this raise pushes you into a higher bracket or increases your liability, you might want to tweak your W-4P or state tax withholdings now so you don't owe a surprise at the end of the year.
- Review Health Premiums: The FEHB (Federal Employees Health Benefits) premiums usually go up in January too. Often, the FEHB increase eats a significant chunk of the COLA. Compare your new premium against the COLA bump to see your actual "spendable" increase.
- Maximize the TSP: If you’re an active employee getting that 1% raise, consider putting that extra 1% directly into your Thrift Savings Plan. You won't "miss" the money since you weren't getting it anyway, and the compounding interest is a lifer-saver.
The 2026 COLA for federal employees update isn't going to make anyone rich, but it is a necessary buffer. Whether you're navigating the cap on FERS or trying to stretch a 1% active-duty raise, staying on top of these numbers is the only way to keep your retirement plan on track.
Keep an eye on the 2027 projections starting this July; that's when the next cycle of data begins to trickle in.