Federal employees and others who receive Social Security benefits will get a 1.7 percent increase in their monthly payments in January 2015.
This will be the third straight year that federal retirees, along with millions of Social Security recipients and disabled veterans, will receive historically small increases in their cost of living adjustment (COLA). There were two years (2010 and 2011) in which there was no COLA increase at all. The 1.7% increase is less than it was in 2012 when the increase was 3.6%.
The COLA impacts federal retirees in different ways depending upon their situation. Federal Employees Retirement System (FERS) and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements. FERS disability retirees get the adjustment, except when they are receiving a disability annuity based on 60 percent of their high-3 average salary. Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA calculation. FERS survivors receive the FERS increase on their entire annuity, even where component service is involved.
In other words, the cost-of-living adjustment for Social Security recipients, CSRS retirees and FERS retirees (other than special category employees) age 62 or older will be 1.7%.
Many readers have commented that the COLA does not reflect their true cost of increasing prices. That is generally correct. There are higher increases for essential items such utility and grocery bills. Health care costs are also going up considerably with some insurance policies under the federal employees health program starting to impose much higher deductibles and other fees that can increase the cost of obtaining medical care. (See Finding the Cost of Your Insurance in 2015)