The uncertainty is over, and the numbers are set. President Trump has finalized a 1% across-the-board pay raise for the vast majority of the federal civilian workforce in 2026. As reported by FEDweek, this executive order solidifies a lean year for federal employees, offering a raise that falls well below inflation while explicitly prioritizing military personnel and select law enforcement officers (LEOs) with a significantly higher 3.8% increase.
For most general schedule (GS) employees, this isn’t just a small raise—in real economic terms, it is a pay cut.
📉 The Numbers: A Stark Divide
The 2026 pay adjustments create a clear two-tier system within the federal government:
- The Majority (GS & Wage Grade): You will receive a 1.0% increase to base pay. Crucially, there will be 0% increase in locality pay, meaning your locality adjustment remains frozen at 2025 levels.
- The Military & Select LEOs: Military personnel will receive a 3.8% raise. To maintain parity, the President has authorized an “alternative plan” providing an additional 2.8% (totaling 3.8%) for “certain” federal law enforcement officers.
- Note: This applies automatically to LEOs in GS grades 3-10 (GL pay plan) and wildland firefighters (GW pay plan). OPM is tasked with identifying which other LEO categories at agencies like DHS and DOJ will qualify for this boost.
📊 Sound Data: The “Real Wage” Loss
To understand the impact of a 1% raise, you have to look at the broader economic context.
1. The Inflation Gap: Retirees are receiving a 2.8% Cost-of-Living Adjustment (COLA) in 2026 to keep up with inflation. Active employees are receiving only 1%.
- The Reality: If your living costs (grocery, housing, insurance) rose by 2.8% but your paycheck only grew by 1%, your purchasing power has effectively decreased by 1.8%. You are working the same job for “less” value than you were a year ago.
2. The Widening Pay Gap: The Federal Salary Council’s most recent data indicates that federal workers already lag behind their private-sector counterparts by approximately 24.72%. A 1% raise, when private sector wage growth is averaging closer to 3-4%, widens this chasm further, making retention of top talent increasingly difficult.
3. Historical Whiplash: After seeing raises of 5.2% (2024) and 4.6% (2023), a drop to 1% represents a massive deceleration in income growth, disrupting the financial trajectories of employees who had adjusted their budgets to the recent trend of higher adjustments.
🛡️ Your Financial Strategy Must Adapt
When the government tightens its belt, you must tighten yours. A 1% raise likely won’t cover the rising premiums of your FEHB plan or the general cost of living.
This is where Internal Benefit Advisors provides essential guidance. We help you find the “raise” in your budget that the government refused to give you.
How We Help You Weather the Freeze:
- Cash Flow Optimization: We review your pay stub to identify “leaks”—like over-withholding on taxes or inefficient benefit selections—to put more cash back in your pocket immediately.
- LEO “Windfall” Strategy: If you are one of the lucky LEOs receiving the full 3.8%, we help you channel that extra 2.8% directly into your TSP or an IRA. Don’t let lifestyle creep absorb it; use it to buy your future freedom.
- High-3 Protection: For those nearing retirement, a year of 1% growth drags down your High-3 average. We can recalculate your projected annuity to see if working an additional few months is necessary to hit your income targets.
- Debt Management: With purchasing power shrinking, high-interest debt becomes more dangerous. We help you structure a plan to eliminate bad debt before it eats into your reduced real wages.
The 2026 pay raise is final. Ensure your financial plan is resilient enough to handle it.
Contact Internal Benefit Advisors today for a 2026 budget and benefits review.
References
- FEDweek. “1 Percent Federal Raise Finalized for Most; Higher Military Rate for Some Law Enforcement.”
- OPM. Memorandum on January 2026 Pay Adjustments.
- Federal Salary Council. Annual Report on the Federal-Private Sector Pay Gap.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
