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Published: Oct 26, 2023 8 min read
Photo-illustration of two hands holding an abstracted social security card.
Olive / Money; Getty Images

Each year, retired Social Security recipients are automatically eligible for a cost-of-living-adjustment (or COLA) to their benefits to compensate for inflation — but not all COLAs are created equal.

Although it was announced in October that Social Security beneficiaries will receive a 3.2% COLA increase next year, most retired federal workers will receive just a 2.2% raise.

COLA calculations for most U.S. retirees are based on the average year-over-year inflation rate in the third quarter (July, August and September) as determined by a measure called the CPI-W. But more than 2 million government employees covered by the Federal Employee Retirement System — a three-tier plan that includes Social Security — typically receive a lower rate than other retirees in years when inflation is high.

Under FERS, retirees only receive the same COLA as Social Security beneficiaries and federal workers who retired under the old Civil Service Retirement System if annual inflation is 2% or less. If inflation is between 2% and 3%, the FERS COLA is fixed at 2%.

And if inflation is greater than 3% — like it is now — the FERS increase is 1% less than the overall COLA.

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