The latest projection for the 2026 Cost-of-Living Adjustment (COLA) for federal retirees is taking shape, and it’s revealing a hard truth about the challenges of maintaining purchasing power in retirement. As of the latest count reported by FEDweek, the COLA stands at 2.5 percent with two months of inflation data still to be calculated. While this figure may still change, it points toward a modest increase that may not feel sufficient to retirees who have been battling years of stubborn inflation.
This projection comes on the heels of several volatile years for retirees. After a historic 8.7% COLA for 2023, the adjustment for 2024 fell to a more moderate 3.2%. The current 2.5% projection for 2026, if it holds, would be the lowest in three years. This highlights the inherent unpredictability of the COLA, which is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Recent data from the Bureau of Labor Statistics shows that while overall inflation has cooled, costs for essentials like housing and healthcare continue to rise at a faster pace. This means that even with a COLA, many retirees may feel like their budgets are being squeezed and their purchasing power is eroding.
For federal employees still in the workforce, this is a critical preview of the financial realities of retirement. The COLA is a reactive measure, not a proactive one; it compensates for past inflation but doesn’t guarantee that your income will keep pace with your actual expenses. This makes your personal retirement strategy—particularly how you manage your Thrift Savings Plan (TSP) and other assets—the most important factor in securing a comfortable future.
From COLA to Comprehensive Plan: Taking Control of Your Financial Future
Relying solely on your FERS/CSRS pension and the annual COLA is a passive strategy that leaves your financial well-being vulnerable to the whims of inflation. A truly secure retirement requires a comprehensive financial plan that is designed to generate growth and protect your purchasing power over the long term.
This is where specialized, expert guidance becomes an indispensable asset. Internal Benefit Advisors is dedicated to educating federal and state employees on the intricacies of their benefits, helping them build a resilient retirement plan that goes far beyond just the pension.
Here’s how they empower you to take control:
- Strategic TSP Management: Your TSP is your most powerful tool to combat inflation. Internal Benefit Advisors can help you analyze your fund allocation and develop a strategy aimed at achieving the long-term growth needed to outpace rising costs and supplement your COLA-adjusted pension.
- Holistic Retirement Income Planning: They provide a complete analysis of all your potential income sources—pension, TSP, and Social Security—to create a cohesive plan. This includes running different scenarios to show how various COLA projections and market conditions could impact your overall financial picture.
- Empowerment Through Education: The world of federal benefits and retirement planning is complex. Internal Benefit Advisors provides the clear, unbiased education you need to understand every component of your financial life and make confident, proactive decisions that protect you and your family from the eroding effects of inflation.
The annual COLA is a valuable part of your retirement, but it shouldn’t be the only thing you rely on. The time to build a powerful, inflation-resistant financial plan is now.
Take the definitive step to secure your future. Contact Internal Benefit Advisors today for a consultation and build the secure and prosperous retirement your years of service have earned.
References
- FEDweek. “COLA Count Stands at 2.5 Percent with Two Months to Go.”
- U.S. Bureau of Labor Statistics. (2025, August). Consumer Price Index Summary.
- Social Security Administration. Cost-of-Living Adjustments.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
