Federal Employee Retirement & Cost of Living Adjustments
Planning for your federal employee retirement doesn’t have to be overwhelming. However, it is critical to take the time to understand major decisions like Cost-of-Living Adjustments (COLAs) and how they may affect federal annuitants (retirees, spouses, survivors, and more). Federal Educators look at what this important detail could mean for your retirement plans.
The first step in understanding a COLA is determining who is eligible to receive it. Most retirees at age 62 and up qualify for a COLA under one of the federal retirement programs like Federal Employees Retirement System (FERS), FERS Special, Civil Service Retirement System (CSRS), or the Organization and Disability Retirement System (ORDS). There are certain retirees under survivor, disability, and other special provisions that have different COLA rules. For example, FERS disability retirees get the adjustment, except if receiving a disability annuity based on 60% of their high-3 average salary. Also, if you have a CSRS component under FERS, the component is subject to a CSRS COLA calculation. Survivors under FERS receive an increase on their entire annuity, even where component service is involved.
Currently, the COLA amount for the year 2022 is calculated for any annuitants who retired under CSRS to receive a 5.9% increase and those who retired under FERS will receive a 4.9% increase. However, there is an exception for those who retired in the last year to receive a prorated COLA amount. Prorated accounts earn one-twelfth of the increase for each month they received benefits. For example, if the benefit began on November 30, 2021, the prorated COLA would be one-twelfth of the full COLA. Keep in mind that retirement annuity benefits are adjusted to meet rising costs of living annually.
Would you like to learn more about COLAs? Federal Educators can help you prepare for retirement with the perfect combination of educational resources and a knowledgeable team. Call our Tampa office at (813) 755-7037 or request a complimentary benefit analysis today.
