What The 2026 Budget Means For Federal Retirement Benefits
The budget is being finalized for the 2026 tax year. If you’re looking to get a jumpstart on tax strategy revisions, we have just enough information to get the ball rolling. From the cost-of-living adjustment (COLA) to standard tax deductions, this is your guide covering all the essentials you need to know. Take hold of your future as we enter the new year and reach out to Federal Educators’ benefits advisors near you!
| Catch up with our article, “Have Federal Employee Retirement Benefits Been Cut For 2025-2026?” |
2026 COLA Predictions – How to Prepare For Any Scenario
Inflation affects every tax bracket. COLA is often the one thing that everyone wants to know, and we have your current update on the budget for 2026. While the exact numbers have yet to be set in stone, skilled analysts are predicting an increase of around 2.7%. Considering that this estimate is based on market trends during the summer of this year, this is perhaps the most accurate prediction with fresh calculations.
Let’s say that this will be the increase for next year. What would the new 2026 COLA mean for your federal retirement benefits? Here’s a breakdown:
Civil Service Retirement System (CSRS) retirees will likely see the full COLA percentage.
Federal Employees Retirement System (FERS) retirees will receive a lower percentage in line with the current rules.
Read more > What’s Changing For Federal Retirement In 2026? What We Know
Increased FERS Contributions – The Good and the Bad
The next order of business tackled the topic of federal FERS pension contributions. As you know, there are minimum and maximum limits when contributing to federal employee retirement programs. It’s always a good idea to cap out your limit for the most potential savings, but that strategy doesn’t always fall in line with every financial situation. Federal government employees sometimes make minimum contributions for less financial strain.
FERS pension plan contributions are expected to increase to 4.4% for 2026.
The Good: This increase will offset the impact of inflation, so your FERS retirement plan stays on course.
The Bad: Some federal employees might have a hard time adjusting to decreased paychecks while still employed.
New Full Retirement Age Requirement
Full retirement age (FRA) is expected to increase to 67 in 2026 for those born on or after the year 1960. With so many rules and regulations for the federal employee retirement system revolving around age, this seemingly small update will have many senior employees and retirees adjusting their federal retirement plans to offset the changes. More importantly, this raised age limit will affect how federal employees receive their federal employee retirement benefits, like Social Security pensions.
Higher Standard Tax Deduction For Seniors
There is some good to come out of the 2026 budget, like a higher standard tax deduction for seniors 65 or older. This will be a temporary deduction that’ll see its final tax year in 2028, but for now, this FERS retirement benefit will subtract $6,000 from your standard deductible. Meet with federal benefits advisors near you to see if you qualify and how you can claim it.
Keep Your Benefits In Check and Secure Your Retirement With Federal Educators!
What should you do with all of this new information? Schedule a consultation with Federal Educators to find out how the 2026 budget might affect your FERS benefits and steps you can take for a secure future. Contact us today at (813) 568-1212 to speak with our team of federal benefits experts!