How will the 2026 COLA affect military and federal retirement payments?
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Executive summary
The 2026 Cost‑of‑Living Adjustment will raise most military retired pay, VA disability, Social Security benefits and CSRS annuities by 2.8 percent, while many FERS annuitants will get a smaller 2.0 percent increase because of FERS’ different statutory formula — producing modest, across‑the‑board boosts but also uneven outcomes across federal retirement systems [1] [2] [3]. The increase takes effect in late 2025/January 2026 for most payments and will add roughly $28 per $1,000 of monthly military retirement pay each month [4] [5].
1. What the announced numbers mean in practice
Military retirees and disabled veterans will see their monthly checks increase by 2.8 percent for 2026 because military retired pay is indexed to the Social Security COLA, which the Social Security Administration set at 2.8 percent for 2026 [1] [4]. Civil Service Retirement System (CSRS) annuitants and Social Security beneficiaries are also slated to receive the 2.8 percent adjustment [2] [6]. By contrast, most Federal Employees Retirement System (FERS) annuitants will receive a 2.0 percent “diet” COLA in 2026 under the FERS statutory COLA formula that produces smaller increases when inflation is low-to-moderate [2] [7].
2. Timing, dollar examples and proration rules
The 2026 COLA becomes effective with December 2025 payments and normal January 2026 disbursements for most programs; agencies generally apply the percentage to current benefit amounts so that, for example, a retiree receiving $1,000 monthly would get about $28 more per month under a 2.8 percent increase [5] [4]. New retirees or annuitants who have not received a full 12 months of benefits typically get a prorated COLA based on months in payment status, which reduces the immediate dollar effect for those who retired during 2025 [4] [6].
3. Who is left behind or gets special treatment
Not all retirement categories enjoy the full 2.8 percent: FERS annuitants often get a reduced “diet” COLA (2.0 percent in 2026) because FERS’ formula only provides the full COLA above certain inflation thresholds, producing a material divergence between federal cohorts exposed to the same economic conditions [2] [7]. Certain military retiree groups also face built‑in reductions — for example, members under the Career Status Bonus/REDUX plan have COLAs that are one percentage point lower than most other military retirees [8].
4. Why the COLA landed at 2.8 percent and the measurement debate
The COLA is driven by the Bureau of Labor Statistics’ CPI‑W measure (Consumer Price Index for Urban Wage Earners and Clerical Workers) comparing year‑over‑year averages, and the 2026 figure reflects the slowing inflation trend compared with the pandemic period [2] [9]. Critics and some advocacy groups argue CPI‑W understates the inflation older households face because it does not focus on retiree spending patterns (e.g., higher medical costs), a long‑running dispute over whether the CPI variant used for COLA accurately captures seniors’ costs [1] [9].
5. Fiscal context and policy caveats
Although the adjustment preserves nominal purchasing power, its modest size versus recent large spikes means healthcare premiums and other retiree costs could still outpace increases, a concern highlighted by retiree associations pointing to rising federal employee health premiums and lifetime compounding effects of smaller COLAs for FERS members [7] [10]. Separate pay processes apply to active‑duty raises — referenced in some reporting as a 3.8 percent military pay increase proposal — which are distinct from COLA calculations on retirement pay [1].
6. Bottom line for retirees and planners
The 2026 COLA will provide a predictable, modest boost for military and many federal retirees (2.8 percent for military and CSRS; 2.0 percent for most FERS), with the timing, proration rules and plan‑specific exceptions determining individual outcomes; retirees should expect slightly higher monthly checks but also to contend with inflation components (like healthcare) that may rise faster than the COLA [4] [2] [7].