A 3.6% cost-of-living adjustment (COLA) will apply to Social Security payments and many retirement benefits in January 2027. Most FERS retirees will receive a smaller 2.6% increase, according to FNN — Benefits.
Key Facts
- Social Security: 3.6% COLA takes effect in January 2027.
- CSRS annuitants: CSRS annuities track the full COLA, so these retirees receive 3.6%.
- FERS annuitants: The adjustment is 2.6%, one percentage point lower than the full COLA.
- Why the gap exists: Under FERS rules, when inflation exceeds 3%, the annuity COLA is the inflation figure minus 1 percentage point. A 3.6% increase therefore becomes 2.6%.
- Eligibility: FERS retirees generally become eligible for annual COLAs at age 62. Exceptions include disability retirees and survivor annuitants.
What It Means For You
The one-point difference adds up over time. Using a hypothetical $3,000 monthly annuity:
| Retirement system | COLA | Monthly increase | New monthly annuity |
|---|---|---|---|
| CSRS | 3.6% | $108 | $3,108 |
| FERS | 2.6% | $78 | $3,078 |
That is a $30 monthly gap, or $360 a year, on the same starting annuity. Because each year's COLA builds on the last, the difference compounds.
FERS retirees who also collect Social Security will see both adjustments. Their Social Security benefit rises by the full 3.6%, while their FERS annuity rises by 2.6%. Retirees who have not yet reached 62 should not expect a COLA on their FERS annuity unless they fall under an exception.
Federal employees planning to retire can estimate how COLAs may affect their income with a FERS retirement calculator. It shows how different retirement dates and annuity amounts play out.
Context
The FERS COLA formula is set in law and differs from the Social Security formula. Social Security COLAs reflect the full measured inflation increase. FERS applies a reduction when inflation is above 2%:
- Inflation of 2% or less: FERS retirees receive the full increase.
- Inflation between 2% and 3%: The FERS COLA is capped at 2%.
- Inflation above 3%: The FERS COLA is the inflation figure minus 1 point.
The 3.6% figure falls in the top tier, which produces the 2.6% FERS adjustment.
Annuitants should check their January 2027 payments and any notices from OPM and the Social Security Administration to confirm the correct adjustment.
Source: FNN — Benefits