Does Inflation Affect My Federal Employee Retirement Benefits?

Inflation is a common concern among federal employees. If it’s not something you’ve thought about, it’s time to start. That’s because the cost of living steadily rises year after year, so any amount you save up now might not be enough by the time you retire. Learn more about how to prepare your federal retirement plan in a way that accounts for inflation and schedule a consultation with Federal Educators for expert advice on federal retirement benefits near you!

Your Quick Guide to COLAs

Preparing yourself for inflation is typically done through cost-of-living adjustments, also known as COLA. Income earners under the Federal Employees Retirement System (FERS) often use COLA to balance out their federal retirement plan and cancel out the impact of inflation. COLA is also a valid option for those under the Civil Service Retirement System so CSRS employees can optimize their savings, too. These cost-of-living adjustments are often made annually and can be based on the Consumer Price Index for reference of how much you should adjust your contributions and balance the scales.

What’s COLA Looking Like For 2025 (And the Future)?

For 2025, CSRS and Social Security will be seeing a cost-of-living adjustment of 2.5%. That might not seem like much compared to last year’s COLA of 3.2%, but that goes to show how these adjustments are calculated using current data and are subject to change any given year.

Learn more about CSRS retirement and Social Security with our social security analysis.

Retirees under the Civil Service Retirement System and Social Security may be seeing a 2.5% COLA increase, but FERS employees will only be seeing a 2% adjustment this year. Why is the FERS annuity increase this year much lower? That’s because the FERS program is dependent on changes to CSRS.

Here’s what that can look like per year:

Scenario 1	Scenario 2	Scenario 3
CSRS sees an increase of less than 2%, so FERS receives a full adjustment.	CSRS sees an increase between 2-3%, so FERS only receives 2%.	CSRS sees an increase of 3% or more, so FERS receives the same minus 1 percent.

This year, we happened to fall under scenario #2 because the CSRS annuity increase was at 2.5% which is why the federal FERS increase was 2%. As a federal employee who wants to maximize their federal government retirement benefits, it is critical to keep up with these updates each year so you can adjust your contributions accordingly and receive the full amount by the time you retire.

What Else Should I Do?

While it’s critical to maximize your CSRS or FERS, you should also look into all of your other federal retirement programs to double up your retirement income (or more). This includes your Thrift Savings Plan, Health Savings Account, and anything else you may qualify for. It also pays to keep in mind that COLA can decrease each year just as it can increase, so don’t anticipate a high percentage one year because of changes that occurred the year before.

Plan Ahead, Consult Federal Educators For Expert Retirement Benefits Advice!

Need help sorting out your federal employee retirement benefits and frequent adjustments? Reach out to a Federal Educators benefits advisor today so we can take a personal look at your available government employee benefits and introduce you to more federal employee retirement programs that you may qualify for!