Fedweek

COLAs are effective on December 1 of each year and are applied to the annuity payments made the following month. Image: chayanuphol/Shutterstock.com

The inflation index used to set federal retirement COLAs fell by 0.1 percentage points in July, the first decrease so far in the measuring period toward the January 2023 COLA.

That lowered the count, with now two months before it is finalized, to 8.9 percent from the 9 percent through the June count.

However, the COLA still is on track to be around or above the 8.7 percent of 1982 that has not been exceeded in the time since, as well as above the COLA in January of this year which was the largest in that period—5.9 percent for those retired under the CSRS program and 4.9 percent for those retired under the FERS program who are eligible for COLAs (generally meaning not until after reaching age 62).

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.

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See also,

Your FERS Annuity is Worth More Than You Think

OMB Previews Potential Changes in Pay, Benefits Law

The Process of Retiring – OPM’s Benefits Determination Process

House Republicans Revive Retirement Benefit-Cutting Proposals

Retiring from a Federal Job – Getting Started

2022 Federal Employees Handbook