Retired federal employees receiving a CSRS pension receive the same cost-of-living adjustment (COLA) as recipients of Social Security retirement benefits. It is calculated by looking at inflation numbers for the months of July, August, and September as indicated by the CPI-W index. The average of those three numbers results in the COLA. For FERS retirees, the COLA might be slightly less.
If the adjustment is more than 3%, FERS pensions are adjusted by the CSRS COLA minus 1. So in 2024, when the Social Security COLA was 3.2%, the COLA for FERS was 2.2%. If the adjustment for CSRS is between 2.0% and 3.0%, FERS would receive a flat 2.0%. Anything less than that, then FERS, CSRS, and Social Security all get the same adjustment to their retirement income.
The latest estimates from the Senior Citizens League predict a 2.4% COLA for social security and CSRS in 2025, and this would mean a 2.0% adjustment for FERS. If the adjustment ends up equal to 2.4%, this would be slightly higher than the Federal Reserve’s current target for inflation – which is 2.0%.
The CPI-W index showed prices growing at 3.1% inflation in February, considerably higher than the 1.7% inflation rate seen in January. All of these numbers are a far-cry from the peak seen during the summer of 2022, when inflation was at 9.1%. This contributed to the highest COLA of the past several decades as the adjustment for 2023 was 8.7%.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
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