How will a 2026 COLA affect federal retirement benefits like FERS and Social Security?
Executive summary
The Social Security Administration set the 2026 COLA at 2.8%, which will apply in full to Social Security and CSRS annuities beginning January 2026 (SSA says 2.8%) [1] [2]. FERS annuitants will not get the full 2.8% for their FERS annuity: by law FERS uses a tiered formula that produces a 2.0% “diet” COLA for 2026 (multiple federal benefits outlets and unions report FERS at 2.0%) [3] [4] [5].
1. How the 2026 COLA was set and who it covers
The annual COLA is calculated from the change in the CPI‑W comparing the third quarter of the current year to the prior year; the SSA announced a 2.8% increase for 2026 and says that Social Security and SSI beneficiaries — roughly 71–75 million people — will see benefits rise beginning in January 2026 [1] [2]. Federal CSRS annuities and military retirement annuities also receive the full COLA, so those payments rise by the same 2.8% [3] [5].
2. Why FERS retirees get less: the “diet” COLA explained
FERS annuities follow a different, legislated formula: when CPI‑W is between 2% and 3%, FERS annuitants receive a flat 2.0% increase rather than the full index; if CPI‑W exceeded 3% the increase would be CPI‑W minus 1% (this structure dates to FERS’ creation) [6] [5]. For 2026 that rule produces a 2.0% increase to the FERS pension even though Social Security and CSRS get 2.8% [3] [4].
3. What this means dollar‑for‑dollar for beneficiaries
On average Social Security beneficiaries will see roughly $60 more per month in 2026 from the 2.8% COLA, though exact amounts vary by benefit level [7]. Federal retirees under CSRS see their annuity rise by 2.8% as well; FERS annuitants’ FERS annuity will rise 2.0% while any Social Security benefits they receive still rise the full 2.8% [5] [8].
4. Why the “raise” can feel smaller in practice
Several reporting outlets note offsets that reduce how much extra cash lands in retirees’ pockets: higher Medicare Part B premiums and other deductions are typically taken from Social Security checks and can erode the net gain from a COLA [9] [7]. Coverage and tax changes tied to benefit income are not covered in detail in these sources — available sources do not mention other offset scenarios beyond Medicare premium effects (not found in current reporting).
5. Political and advocacy responses: unequal COLAs draw criticism
Unions and retiree groups publicly criticized the FERS cap as inequitable because FERS annuitants face the same inflation on living costs but receive a smaller automatic increase; organizations like NARFE and NTEU highlighted the discrepancy and urged legislative fixes such as equalizing COLAs [10] [11]. Congressional proposals to change the treatment of FERS COLAs (for example H.R. 491 mentioned by one outlet) have been introduced but remain pending according to reporting [8].
6. Practical planning implications for retirees and current employees
Retirees should expect the January 2026 payments to reflect the announced increases: Social Security and CSRS +2.8%; FERS annuity +2.0% [1] [3]. Financial planners and advocacy outlets urge FERS participants to account for the persistent “gap” between inflation and their annuity growth when budgeting and considering benefit elections [12] [8].
7. Limits of the reporting and unanswered questions
The sources consistently document the headline figures and the FERS formula but do not quantify how many FERS retirees will be most affected by the gap, nor do they give a comprehensive breakdown of net impacts after Medicare, taxes and other deductions for every beneficiary subgroup — available sources do not mention detailed demographic breakdowns or exhaustive net‑takehome calculations (not found in current reporting) [2] [9].
Bottom line: Social Security and CSRS checks rise by 2.8% in 2026; FERS annuities are capped at 2.0% by statutory rules, and unions and retiree groups say that gap reduces FERS retirees’ real purchasing power [1] [3] [10].