Federal Retirees to Receive 2.8% COLA in 2026; Some Face Lower Hikes

In January 2026, many federal retirees will benefit from a 2.8% cost-of-living adjustment (COLA) to their Social Security and pension payments. This increase surpasses last year’s rates and aligns with expectations from organizations like AARP and the Senior Citizens League.

Understanding the 2026 COLA Increase

The purpose of the COLA is to adjust federal retirees’ and Social Security recipients’ benefits in accordance with inflation. Approximately 75 million individuals, including retirees and those with disabilities, receive Social Security benefits.

However, not all retirees will experience the same increase. Specifically, those in the Federal Employees Retirement System (FERS) will receive a reduced adjustment known as a “diet” COLA.

COLA Adjustments for FERS Retirees

The COLA received by FERS retirees is determined by a specific formula.

• If the COLA exceeds 3%, FERS annuitants receive 1% less than the full COLA.
• If the COLA is between 2% and 3%, FERS annuitants receive a 2% COLA.
• If the COLA is under 2%, FERS annuitants receive the full COLA amount.

Based on these parameters, FERS retirees will receive a 2% COLA in 2026, which amounts to a significant but lesser increase compared to their federal counterparts.

Social Security Benefit Increase

The Social Security Administration has indicated that the increase in benefits will amount to approximately $56 per month for retirees in 2026. Previously, the announcement of COLA was delayed due to an ongoing government shutdown, which is now noted as the second-longest in U.S. history.

Challenges for Federal Retirees

The National Active and Retired Federal Employees Association (NARFE) has raised concerns that the upcoming COLA does not adequately account for the projected 12% rise in health insurance premiums for federal employees and retirees.

In a statement, SSA Commissioner Frank Bisignano remarked, “Social Security is a promise kept, and the annual cost-of-living adjustment is one way we are working to make sure benefits reflect today’s economic realities.”

Historical Context of COLA Adjustments

Over the past decade, annual COLA increases have averaged approximately 2.6%. The adjustments have varied significantly; for instance, the 2023 COLA reached an impressive 8.7%, marking the highest increase in over four decades. In contrast, the 2024 COLA provided a modest 3.2% increase for retirement benefits.

Due to existing limits on COLA adjustments, FERS retirees benefited from a 7.7% increase in 2023 and a 2.2% increase in 2024.