The inflation metrics determining federal benefits are currently painting two very different pictures for the workforce and retirees. As reported by FEDweek, the Office of Personnel Management (OPM) has finalized a solid Cost of Living Adjustment (COLA) for workers’ compensation beneficiaries, while the early projections for the 2027 federal retirement COLA remain surprisingly flat.
For federal employees attempting to time their retirement or manage their post-service income, understanding these diverging timelines is critical to protecting your purchasing power.
📈 The April Boost: 2.6% for FECA Beneficiaries
There is immediate good news for individuals receiving workers’ compensation under the Federal Employees Compensation Act (FECA).
Beneficiaries under this program will see a finalized 2.6% COLA increase, which will be reflected starting with their April 2026 payments.
Why the Discrepancy? While both FECA and standard federal retirement COLAs use the exact same inflation indicator—the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—they operate on entirely different clocks.
- FECA COLAs are calculated on a calendar-year basis, measuring the inflation change from the fourth quarter (October–December) of one year to the next.
- Retirement COLAs are calculated on a fiscal-year basis, measuring the third calendar quarter (July–September).
Because the FECA measurement period captured a slightly different window of economic data, these beneficiaries are locking in a respectable 2.6% adjustment this spring.
📉 Sound Data: The 2027 Retirement COLA Slowdown
While FECA beneficiaries get a spring raise, federal retirees (and those planning to retire soon) need to prepare for a potential “dry spell.”
Through the first five months of the counting period for the January 2027 retirement COLA, the total count stands at a microscopic 0.2 percent.
- The Trend: This sluggish growth follows a relatively mild January 2026 adjustment, where CSRS retirees received 2.8%, and FERS retirees were hit with the “Diet COLA” cap, receiving just 2.0%.
- The FERS Penalty: As a reminder, if the final CPI-W count lands between 2.0% and 3.0%, FERS retirees are strictly capped at 2.0%. If this current trend continues and inflation remains completely flat, there is a very real possibility of a sub-1% COLA—or even a 0% adjustment—for 2027. (By law, if the inflation count finishes negative, benefits are frozen, but they are never reduced).
⚠️ The First-Year “Proration” Trap
If you are planning to retire in 2026, you cannot rely on the headline COLA number to combat your first year of inflation.
Your first federal retirement COLA is prorated based on the month your retirement begins. The adjustment kicks in on December 1st of each year and is paid in your January annuity check.
- The Math: If you retire in January, your first adjustment the following year will only be 11/12ths of the total COLA. Retire in June, and you will only receive 6/12ths (half) of the adjustment.
- The Exception: Social Security COLAs do not follow this proration rule. A full Social Security COLA is paid even if you have drawn benefits for less than a year.
🛡️ Strategy: Inflation-Proof Your Federal Retirement
With the 2027 COLA currently tracking near zero, you cannot depend on automatic annuity increases to offset the rising cost of living. You need a proactive income strategy that bridges the gap.
Internal Benefit Advisors specializes in building inflation-resilient retirement plans for federal employees.
How We Help You Maximize Your Income:
- Retirement Date Optimization: We calculate your exact proration penalty to help you select a retirement date that maximizes your first-year COLA and your accrued annual leave payout.
- FERS “Diet COLA” Mitigation: Because FERS retirees naturally lose purchasing power over time due to the COLA cap, we help you structure your TSP withdrawals and Social Security claiming strategy to outpace inflation.
- FECA Transition Planning: If you are currently on workers’ compensation and approaching retirement age, we help you navigate the complex financial transition from FECA benefits to your OPM retirement annuity, ensuring you don’t trigger overpayments or coverage gaps.
Do not let a flat COLA year derail your retirement security.
Contact Internal Benefit Advisors today for a comprehensive federal retirement income and inflation analysis.
References
- FEDweek. “COLA Count at Just 0.2 Percent; FECA Beneficiaries to Receive 2.6 Percent Boost in April.” February 18, 2026.
- U.S. Office of Personnel Management (OPM). Cost-of-Living Adjustments (COLA) Information.
- Department of Labor. Federal Employees’ Compensation Act (FECA) Benefit Adjustments.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
