Halfway through the counting period toward the January 2023 federal retirement cost of living adjustment, the count stands at 5.5 percent, following an increase in March of 1.5 percentage points in the inflation index used to set the COLA.
That amount already is in the neighborhood of the largest COLAs in decades. In January 2009 CSRS system retirees received 5.8 percent while FERS system retirees eligible for a COLA (generally not until age 62) received 4.8 percent.
Prior to that, there were COLAs of 5.4 and 4.4 percent, respectively, in 1990.
Cost-of-living-adjustments (COLAs) are effective on December 1 of each year and are applied to the annuity payments made the following month. COLAs for those retired less than one year are prorated according to the date on which they retired. If you retire in January, your first adjustment will be made in January of the following year and will be for 11/12ths of the COLA amount. If you retire in February it will be 10/12ths, and so forth. Future COLAs will be for the full amount.
COLA Based on Consumer Price Index
The COLA is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI/W) average of the third calendar quarter of one year to the next. If the inflation count finishes negative, benefits are frozen but not reduced. Also, in that situation the starting point for the next COLA count remains the same.
Note: Social Security COLAs follow the same formula except that a full Social Security COLA is paid even to someone who has drawn benefits for less than a year.