What Changes for Federal Retirees in 2027

Social Security announced a 3.6% cost-of-living adjustment (COLA) for 2027 on October 14, 2026. It's based on the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). SSA measures that rise from the third quarter of 2025 to the third quarter of 2026. In simple terms, both federal retirement systems key off that same CPI-W figure, and the increase first shows up in the payment you receive in January 2027.

CSRS annuities get the full increase, so a CSRS retiree sees 3.6%. FERS annuities get 2.6%, although OPM hadn't posted its own 2027 figures when this was written. Both rates here come from applying OPM's published COLA formula to the 3.6% CPI-W increase in the SSA fact sheet.

FERS uses what most feds call the diet COLA. A CPI-W rise of 2% or less passes through in full, and a rise between 2% and 3% is held to 2%. Above 3%, FERS retirees get the increase minus 1 point. Thus, with the CPI-W up more than 3% this year, FERS lands 1 point below CSRS.

Keep in mind that the gap compounds. A 1-point shortfall looks small in any single year (well, it is small in any single year). However, if inflation ran at 3.6% for 25 years, a FERS annuity would have about a fifth less purchasing power at the end than a fully indexed one. With that said, the diet COLA only bites when inflation runs above 2%, and your Social Security check gets the full increase. In my opinion, that's the strongest argument for treating your TSP as the part of your income that has to keep pace with prices.

Two groups miss out. First, most FERS retirees under age 62 do not receive a COLA on their annuity. The exceptions are disability retirees, survivor annuitants and special-provision retirees (law enforcement officers, firefighters and air traffic controllers), who receive it before 62. If your annuity includes a CSRS component (service you earned under CSRS before transferring), that portion gets the full CSRS increase.

Second, the FERS annuity supplement (the Special Retirement Supplement, or SRS) never receives a COLA. It does not grow with inflation, and it stops at 62. Additionally, if you retired partway through 2026, your first COLA is prorated. OPM pays one-twelfth of the increase for each month you received an annuity.

On August 26, 2026, the President sent Congress an alternative pay plan. It holds General Schedule base and locality rates at 2026 levels for January 2027. Congress could still change that. However, the plan takes effect unless Congress acts, and OPM publishes the final tables and any special rates in December.

A freeze matters most if you're planning to retire in the next three years. The annuity formula multiplies your High-3 average salary (your highest three consecutive years of basic pay), and a year with no across-the-board raise is a year your High-3 grows only through step increases or promotions. That gives the retirement date you pick now a little more weight than usual.

Law enforcement personnel are the exception. OPM plans to raise their pay by 3.8% through special salary rates, with a tentative effective date of January 10, 2027. OPM says special rates count as basic pay for retirement, so the raise reaches the High-3. Pay under special rates is capped at Executive Schedule level IV ($197,200), so employees near the cap may see less. Details are on OPM's law enforcement special rates page.

The retirement earnings test rises to $25,560 a year for people below full retirement age, and to $67,920 in the year you reach it. This matters to FERS retirees for a second reason: the SRS uses the same exempt amount. If you retire early and keep working, you'll lose one dollar of supplement for every two dollars you earn above that limit.

The taxable maximum (the most earnings Social Security tax applies to) rises to $192,300. Simply stated, most federal employees won't notice it. High earners, on the other hand, will see Social Security tax withheld for a few more weeks of the year.

Several 2027 numbers are still on their way. Federal Benefits Open Season runs from November 9 through December 14, and OPM has already posted the 2027 FEHB and PSHB premiums. CMS normally announces the Medicare Part B premium (and the income brackets for the surcharge) in November. Additionally, the IRS usually sets the TSP contribution and catch-up limits in October or November, and OPM publishes the final pay tables in December.

I hope this illustrates why the headline COLA is only a starting point: your own increase depends on your system, your age and whether part of your income is the SRS. If a retirement date in 2027 or 2028 is on the table, rerun your estimate with a frozen salary before you commit to it. Check your January statement. Compare premiums during Open Season. Then stick with your plan.