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Government Employees

What Is the FERS COLA and How Does It Work?

June 23rd, 2023 | 2 min. read

By Kurt Mears, CRPC

FERS money

If you’re like most Americans, I bet inflation is one of your biggest retirement worries. It can make you feel uncertain about your future. That’s why the FERS COLA is the ultimate retirement pick-me-up for federal employees.

The Cost-of-Living Adjustment (COLA) is an important aspect of the Federal Employees Retirement System (FERS) that helps protect the purchasing power of retirees’ basic benefit payments from the effects of inflation.

So, how does it work?

Here are some key points to know about the FERS COLA.

This article covers the following:

  • How the FERS COLA is calculated
  • When the FERS COLA is adjusted
  • FERS eligibility
  • Survivor Benefits COLA
  • Social Security COLA
  • Where to get help

How the FERS COLA is calculated

The FERS COLA is calculated based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter (July – September) of the previous year to the third quarter of the current year.

It is calculated by using the following schedule:

  • If the CPI increase is less than 2%, then the FERS COLA equals the CPI increase
  • If the CPI increase is between 2.1% and 3%, then the FERS COLA is 2%

When the FERS COLA is adjusted

The FERS COLA is provided annually for all federal retirees once they reach age 62, and it takes effect in January of each year. The adjustment is applied to the gross amount of your FERS annuity payment before any deductions.

FERS eligibility

To receive the COLA, you must be eligible for FERS retirement benefits and have been retired for at least one calendar year (12 full months). This means the first COLA you receive would be applicable in January of the year following the completion of 12 months of retirement.

If you retire and begin receiving your annuity during a calendar year, the COLA for that year will be prorated based on the number of months you were retired. Only the full months of retirement count towards the 12-month eligibility requirement for receiving the COLA.

Survivor benefits COLA

If you are receiving survivor benefits based on a FERS annuity, the survivor annuity may also be eligible for the COLA adjustment. The COLA is applied to the gross amount of the survivor annuity, just like for the retiree's annuity.

Start planning your federal retirement today by downloading our freeFERSbook_cover guidebook, FERS Made Simple: Understanding and Maximizing Your Benefit.

Social Security COLA

I think it's important to note that the FERS COLA is separate from the Cost-of-Living Adjustment provided by the Social Security Administration. These are two distinct adjustments that are calculated and applied independently. However, it is possible to receive both the FERS COLA and the Social Security COLA if you are eligible for both.

Where to get help with your FERS benefits

The information I’ve provided here is a general overview of the FERS COLA. For personalized information, I recommend working with a financial adviser for advice and recommendations tailored to your specific circumstances and retirement goals.

We at Advance Capital Management serve federal employees from all sectors. If you need financial guidance, contact us for a consultation. During our meeting, we’ll determine how your benefits, savings, investments and income sources can meet your desired retirement lifestyle and financial goals.

Visit Advance Capital Management's FERS Retirement University to find more helpful articles covering FERS, federal government benefits, TSP investing and more. 


Kurt Mears, CRPC

As a financial adviser, Kurt takes a comprehensive approach to help clients work toward their financial goals by providing wealth management tools including retirement planning, investment portfolio advice and tax strategies. He specializes in federal government benefits and is a Chartered Retirement Planning Counselor.