Whether you’re one of the growing numbers federal retirees or getting close, the annual Cost-of-Living Adjustment is worth keeping an eye on. The COLA helps your annuity keep pace with inflation, and while the official 2027 figure won’t be announced until mid-October, the count is already underway.
As of now, the running estimate stands at 0.7%. That number will change every month until the final figure is locked in at the end of September.
How the COLA Is Actually Calculated
The COLA isn’t based on a single inflation snapshot. It’s calculated by comparing the average CPI-W, the Consumer Price Index for Urban Wage Earners and Clerical Workers, during the third quarter of the current year (July, August, and September) against the average CPI-W from the third quarter of the last year in which a COLA was calculated.
That means several more months of inflation data will be collected before the 2027 COLA is finalized. The February reading of 0.7% is a starting point, not a prediction.
One thing worth watching: the February data doesn’t yet reflect rising energy prices. Analysts have noted that ongoing tariff policies, higher utility costs, and geopolitical instability in oil markets could push inflation higher before September. A low early reading doesn’t guarantee a low final number.
FERS vs. CSRS: Not All COLAs Are Created Equal
Federal retirees under FERS and CSRS receive different COLAs, even when inflation is identical, something worth understanding before you retire.
CSRS retirees and Social Security recipients receive the full CPI-W increase. FERS retirees receive what’s commonly called a “diet COLA,” calculated under a tiered formula:
- If the CPI-W increase is 2% or less, FERS retirees receive the full increase
- If the CPI-W increase is between 2% and 3%, FERS retirees receive a flat 2% — regardless of the actual inflation rate
- If the CPI-W increase is 3% or more, FERS retirees receive the CPI-W increase minus 1%
In 2026, the COLA was 2.8%. CSRS retirees received the full 2.8%, while FERS retirees received 2.0%. The gap in any single year is modest, but over a long retirement, it does add up.
One More Thing Worth Knowing
Federal retirees covered by FERS don’t receive any COLA until age 62, regardless of when they retired. An employee who retires at 57 receives a fixed annuity for five years before adjustments begin.
The 2027 COLA count will continue monthly through September, with the final number announced in October. The next data point, the March CPI-W, is scheduled for release on April 10. For more information on CSRS, FERS, and all things federal retirement, reach out to a Federal Retirement Consultant (FRC®) who can provide tailored guidance.
