The government announced in October that the 2026 cost of living adjustment (COLA) for federal retirees will be 2.8%. The COLA process is complex, and it can be confusing for federal retirees to know when to expect the new amount to actually hit their monthly payments.
The COLA that is announced in October each year takes effect on December 1. That means, however, that the higher annuity payment will show up in January.
According to the Office of Personnel Management (OPM), “Cost-of-Living Adjustments are effective each December first. The adjustment appears in your payment on the first business day of January, which is when your benefit for December is paid.”
Different COLA Amounts for FERS and CSRS
Remember also that the COLA amounts can vary for FERS and CSRS. Federal retirees under CSRS get the full COLA, but under FERS the COLA is reduced as follows:
| If the CPI is: | Then the COLA is: |
|---|---|
| <= 2% | COLA = CPI increase |
| > 2% and <= 3% | COLA = 2% |
| > 3% | COLA = CPI – 1% |
This is because of the additional retirement benefits provided under FERS such as Social Security and matching TSP contributions. This article provides a more detailed explanation.
Prorated COLAs
Another complicating factor is a federal retiree has to have been receiving annuity payments for at least 12 months in order to qualify for the full COLA. When this happens, a retiree will receive 1/12th of the full COLA for each month he or she has been receiving an annuity before December 1 of the adjustment year.
In other words, if you retired during the year, your COLA is reduced proportionally. For instance, if you retired on July 1, this means you were retired for 5 months before December, so you would receive 5/12 of the COLA.
The prorated formula is:
Prorated COLA = Full COLA % × (Months on rolls/12)
The table below illustrates the impact of a prorated COLA on the monthly annuity payments for a $2,000 annuity, assuming a 2% COLA.
| Retirement Date | Months on Rolls Before Dec 1 | Full COLA % | Prorated COLA % | New Monthly Annuity |
|---|---|---|---|---|
| Jan 1 | 11 | 2.0% | 1.83% | $2,036.60 |
| Apr 1 | 8 | 2.0% | 1.33% | $2,026.60 |
| Jul 1 | 5 | 2.0% | 0.83% | $2,016.60 |
| Oct 1 | 2 | 2.0% | 0.33% | $2,006.60 |
| Dec 1 | 0 | 2.0% | 0% | $2,000.00 |
OPM provides extensive details about the COLA and prorated amounts.
