The National Active and Retired Federal Employees Association says that the cost of living index for federal retirees has continued to go up but at a more moderate rate.
For purposes of calculating the next COLA (cost of living adjustment), June’s index is 3.1 percent higher than the third quarter average base index in 2005. This means that some federal retirees will get at least a 3.1 percent cost of living increase next January.
In 2006, the COLA for federal retirees was 4.1%–the largest increase in more than a decade. (See 4.1%! Federal Retirees Can Look Forward to Bigger Than Expected Increase)
The actual amount of the increase for retirees will not be known until October. The COLA amount is calculated using the consumer price index for Urban Wage Earners and Clerical Workers which is compiled by the Bureau of Labor Statistics. The year-to-year increase is based on the federal government’s fiscal year which ends in September. The COLA is derived by comparing the index from September of the previous year.
As federal retirees, most will know that not everyone will get the same increase in their retirement pay. The actual amount will depend on whether the retiree is under CSRS or FERS and the month a person retired. For an example, check out the OPM benefit letter explaining the COLA adjustment for 2006.
For active duty federal employees? It may change because your pay increase, if any, is not determined by a pre-determined formula. For now, it looks like the pay raise will be 2.7% (See Your 2007 Pay Increase: Plenty to Make Some Happy and Some Angry)