A cost-of-living adjustment, or COLA, is the annual increase meant to keep a retirement check from falling behind prices. For 2027 it is not the same size for every federal retiree. The Social Security Administration measured a 3.6 percent rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers, the CPI-W. The Office of Personnel Management pays that full 3.6 percent on Civil Service Retirement System (CSRS) annuities. Most Federal Employees Retirement System (FERS) annuities receive 2.6 percent.
Federal retirees call that gap the diet COLA. It is the FERS formula, not a new decision each October. If you are retired, it is in the January payment. If you are still working, it is a fact about the pension you are earning. This explains the published rules. It is not a determination of your own annuity.
What SSA and OPM published for 2027
SSA's latest COLA page states that the COLA is 3.6 percent. Social Security benefits increase with the December 2026 benefit, payable in January 2027. Federal Supplemental Security Income payment levels also rise 3.6 percent for January 2027. Because January 1 is a holiday, those SSI payments go out at the end of December.
Federal annuities use the same price index and a separate statute. OPM's cost-of-living adjustment page states that for 2027, CSRS annuitants receive 3.6 percent and FERS annuitants receive 2.6 percent. The adjustment is effective December 1. It appears in the payment on the first business day of January, because that deposit is the December annuity. OPM applies the percentage to the monthly annuity, then rounds the new amount down to the next whole dollar.
An illustration, not an official notice: $2,000 a month at 3.6 percent rises by $72, to $2,072. The same $2,000 at 2.6 percent rises by $52, to $2,052. Your notice is the only figure that applies to you.
How the 3.6 percent figure is calculated
The Social Security Act sets the formula. COLAs follow the CPI-W, which the Bureau of Labor Statistics calculates every month from prices paid by urban wage earners and clerical workers. SSA uses that index because the statute names it.
A December COLA equals the percentage increase, if any, from the third-quarter CPI-W average of the last year a COLA became effective to the third-quarter average of the current year. SSA rounds an increase to the nearest tenth of one percent. If prices do not rise, or the rounded increase is zero, there is no COLA.
The third-quarter averages
The last COLA year was 2025, so the base is July, August, and September 2025. SSA publishes these CPI-W values:
- July 2025 was 316.349, and July 2026 was 327.104.
- August 2025 was 317.306, and August 2026 was 328.481.
- September 2025 was 318.139, and September 2026 was 330.654.
The third-quarter totals are 951.794 for 2025 and 986.239 for 2026. Divided by three and rounded to the nearest thousandth, the averages are 317.265 and 328.746. SSA's calculation is (328.746 - 317.265) / 317.265 x 100 = 3.6 percent. Before rounding, the result sits a little above 3.6. The nearest tenth is 3.6.
Why October is the announcement month
BLS publishes the September CPI-W in October. Until that month exists, the third-quarter average cannot be finished. The next COLA will use July, August, and September 2027, and it will be announced in October 2027. There is no mid-year correction if prices move after September.
Why most FERS retirees receive 2.6 percent
CSRS receives the CPI-W increase. FERS receives less once that increase is above 2 percent. OPM's rule for FERS and FERS Special benefits has three steps:
- If the CPI increase is 2 percent or less, the COLA equals the CPI increase.
- If the CPI increase is more than 2 percent but no more than 3 percent, the COLA is 2 percent.
- If the CPI increase is more than 3 percent, the COLA is 1 percent less than the CPI increase.
The result is called a diet COLA because it is a reduced share of measured inflation. At 3.6 percent, the FERS COLA is 3.6 minus 1, or 2.6 percent, which is the rate OPM published for 2027. The new amount is still rounded down to the next whole dollar.
What one point does over time
The missing point compounds, because each later COLA applies to an annuity already smaller than a full CPI-W increase would have left it. FERS was designed to sit beside Social Security, which receives the full 3.6 percent, and the Thrift Savings Plan, which receives no COLA at all. Withdrawals from the TSP are what cover prices the annuity does not fully match. The Federal Retirement Blueprint puts the annuity, the TSP, the Federal Employees Health Benefits (FEHB) program, and Social Security on one page.
Who receives a COLA, and at what age
OPM does not pay a FERS or FERS Special COLA to someone under age 62 as of December 1, except in the cases below. CSRS has no age test. A CSRS retiree may receive a COLA at any age.
These are the exceptions:
- Disability annuitants, including certain military reserve technicians who are medically disqualified. An annuity paid at 60 percent of the high-3 average salary does not receive a COLA while it stays at that rate. The high-3 is average basic pay over the highest three consecutive years.
- Military reserve technicians who separated after age 50 and 25 years of service because they lost military membership or rank on account of disability.
- Law enforcement officers, firefighters, and air traffic controllers who retired under the special provisions.
- Spouse, former spouse, and insurable interest survivor annuitants.
Under FERS, children's annuities increase under CSRS rules, at the full CPI-W percentage, and those adjustments are never prorated. Children, students up to age 22, and survivors are eligible for a cost-of-living increase.
A CSRS component, and a partial first year
Some transferees kept a CSRS computation on part of a FERS annuity. That portion follows CSRS rules: 3.6 percent for 2027, with no age-62 wait. The FERS portion follows the diet COLA, so one payment can carry both rates.
Someone already eligible receives the full percentage only after a full year of payments. Otherwise the increase is one-twelfth for each month benefits were received, under both CSRS and FERS. If you were not eligible yet, the handbook rule is different. The first COLA after you become eligible is the full percentage, not a prorated one, when the earlier time was spent under 62 or on a disability annuity at 60 percent of the high-3. Retiring and turning 62 in the same year is a separate case, and the OPM letter settles it. OPM also skips an increase that would push payments over a legal cap. That limit appears on your notice.
What to compare when the notice arrives
Compare the new gross annuity with the prior gross before you judge the deposit. Tax withholding, a survivor reduction, and an FEHB premium do not all move with the COLA, so the net deposit can change by a different dollar amount. A premium increase can absorb part of a 2.6 percent raise. This article does not estimate any 2027 FEHB premium. When the brochure arrives, set it beside the new gross.
The 10-step roadmap is the order we use with federal employees: the pension, the TSP, Social Security, and only then what one year's increase can support. Narrower questions are on the FAQ. This piece sits with the other federal benefits articles, and the educational resources library holds the rest. We are a fee-only practice. Nothing here depends on a commission, and nothing here replaces the notice OPM or SSA sends you.
Frequently asked questions
Is the 2027 COLA 3.6 percent for every federal retiree?
No. CSRS annuities receive 3.6 percent. Most FERS annuitants receive 2.6 percent, because the CPI-W increase is above 3 percent and the FERS rule subtracts one point. A CSRS portion inside FERS still receives 3.6 percent.
When is the higher annuity paid?
The annuity COLA is effective December 1 and shows up on the first business day of January, in the payment that covers December. Social Security benefits for December 2026, paid in January 2027, carry 3.6 percent on a separate notice.
I retired this year. Do I get the full percentage?
If you were already eligible and have been paid for less than a full year, the increase is one-twelfth for each month of benefits. Children's benefits are not prorated. If you were under 62, or still at the 60 percent disability rate, the first COLA after you become eligible is the full percentage. Use the letter OPM sends.
I am a FERS retiree under 62. Does this COLA apply?
Not on an ordinary FERS annuity. You must be 62 as of December 1 unless you are a disability annuitant off the 60 percent high-3 rate, a qualifying military reserve technician, a special-provision law enforcement, firefighter, or air traffic controller retiree, or a spouse, former spouse, or insurable interest survivor.
Where are the official figures?
The CPI-W averages and the 3.6 percent result are on the Social Security Administration latest COLA page. The Bureau of Labor Statistics publishes the Consumer Price Index at bls.gov/cpi. OPM states the 2027 CSRS and FERS percentages on its cost-of-living adjustment page.
