The 2027 COLA is out. Social Security and CSRS retirees will see a 3.6% increase, starting with the payments that arrive in January.
If you’re on FERS, the rules are less generous. When the COLA lands above 3%, FERS retirees get a full point less. Between 2% and 3%, FERS retirees get 2%. So this year’s 3.6% works out to 2.6% for FERS. And if you retired before 62 on a regular FERS pension, you won’t see a COLA at all until you turn 62. (Disability retirees, survivors, and special-category employees like law enforcement officers and firefighters are the exceptions.) That one catches people who leave at 57 under the MRA rules and haven’t done the math on five years of a flat check.
That’s the number everyone was waiting for. We want to put a different one next to it.
Ten years of premiums against ten years of COLAs
These are the increases in the enrollee share of FEHB premiums that OPM announces every fall, set against the COLAs for the same years.
| Year | FEHB enrollee share | CSRS / Social Security COLA | FERS COLA |
|---|---|---|---|
| 2018 | 6.1% | 2.0% | 2.0% |
| 2019 | 1.5% | 2.8% | 2.0% |
| 2020 | 5.6% | 1.6% | 1.6% |
| 2021 | 4.9% | 1.3% | 1.3% |
| 2022 | 3.8% | 5.9% | 4.9% |
| 2023 | 8.7% | 8.7% | 7.7% |
| 2024 | 7.7% | 3.2% | 2.2% |
| 2025 | 13.5% | 2.5% | 2.0% |
| 2026 | 12.3% | 2.8% | 2.0% |
| 2027 | 10.9% | 3.6% | 2.6% |
| Average | 7.50% | 3.44% | 2.83% |
| Compounded | +104.9% | +40.0% | +32.0% |
Over that decade, the enrollee share of premiums more than doubled. A FERS pension grew 32%. And the last three years were worse than the average, not better: 13.5% in 2025, 12.3% in 2026, and 10.9% in 2027, against FERS COLAs of 2%, 2%, and 2.6%.
What that looks like in dollars
Take a $4,000 monthly FERS pension and a $500 monthly premium, an ordinary starting point, and run both forward through the actual increases in the table. (This assumes you’re past 62 and receiving every COLA.)
After ten years, the pension is $5,279 a month and the premium is $1,025. The pension grew $1,279. The premium took $525 of it. About 41% of the raise went to health insurance, and the premium went from 12.5% of the pension to more than 19%.
Nothing went wrong in that scenario. The COLA did its job. The pension paid. The coverage stayed in force. And still, the gap widened every year, and it keeps widening for as long as you’re alive to see it. You can run your own version with the FERS Pension Calculator and the FEHB vs. Medicare Part B Cost Calculator.
The benefit isn’t the problem
We don’t want this read as an argument that federal retirement is in bad shape. It isn’t. A pension that pays for life and adjusts every year is rare now. Put Social Security next to it doing the same thing, plus the FERS supplement bridging you to 62 if you qualify, and you have two or three inflation-adjusted lifetime income streams. Most people retiring out of private-sector jobs have one, and a pile of money they have to ration themselves.
The problem is narrower than that. Your income is indexed to inflation, and for FERS, often inflation minus a point. Your largest unavoidable expense isn’t indexed to anything, and over the last decade it rose more than twice as fast. Stretch that over a thirty-year retirement, and the two lines keep moving apart.
Three places to work on it
The Medicare decision at 65. This is the biggest lever most retirees have and the one people most often decide casually. Whether to take Part B alongside FEHB, whether IRMAA is going to reach you, how well your specific plan coordinates once Medicare is primary. A good answer and a mediocre one can be a few thousand dollars a year apart, and that difference compounds at the 7.5% rate rather than the 2.8% one. Start here.
Don’t make the TSP absorb all of it. Traditional TSP withdrawals are ordinary income, and pulling a rising amount every year to cover a rising premium is the pattern that does the most lasting damage when your first few retirement years land in a bad market. Most of the fix happens earlier than people expect, in the gap years before RMDs start, and it’s worth knowing the rollover mistakes before you move anything.
Build a second pension outside the federal system. You already know what a pension is worth because you have one. What most federal employees haven’t considered is that you can buy yourself another one with money you already have, structured to pay a set amount for life on terms you agree to up front rather than terms written into statute. Some versions include income that rises over time.
These are insurance contracts, and we’d rather say so than talk around it. We’ve written a longer piece on where they make sense and where they get sold badly. The short version is that they trade liquidity for certainty, they’re the wrong answer if your guaranteed income already covers your spending comfortably, and anyone steering you toward putting most of your savings into one contract is not looking out for you. But if you’re planning for thirty years in which one major expense grows at 7% or more and none of your income does, a layer of income that isn’t tied to CPI-W minus a point deserves a look before you write it off.
If you’re retiring in Colorado
Colorado’s treatment of retirement income works in your favor, and many retirees don’t take full advantage of it. At 65 and older, you can subtract up to $24,000 of pension income, and all of your taxable Social Security comes out. Between 55 and 64, the pension cap is $20,000, and starting with 2025 returns, Social Security is fully subtracted if your AGI is $75,000 or less filing single, or $95,000 filing jointly. Which account your income comes from changes your state tax bill, not just your federal one.
Just don’t expect health costs to be kinder here. If you’re planning thirty years on the Front Range, in Denver, Littleton, Highlands Ranch, Lakewood or Colorado Springs, planning around something like the 7.5% average in the table is prudent, not pessimistic.
What to do now
Now that the COLA is out, the exercise worth an hour is building your own version of that table: your pension and your premium, out twenty or thirty years instead of ten. Have you ever seen those two lines side by side for your own household?
If you’d rather we do it with you, attend one of our free workshops. We cover this there, and attendees are eligible to receive a personalized Federal Retirement Report at no cost and with no obligation. We’ll lay your actual numbers out before anybody talks to you about a product.
Calculators
FERS Pension · FEHB vs. Medicare Part B · Retirement Income · Social Security Claiming · FERS Supplement · TSP Withdrawal · Survivor Benefit Plan · FEGLI Reduction
Related reading
2027 FEHB Premiums: What to Review Before Open Season · Federal Retirement · FEHB and Medicare at 65 · Should Federal Employees Buy Annuities? · Roth Conversions in the FERS Gap Years · TSP Rollover Mistakes · The FERS Supplement Earnings Test
Sources
OPM Plan Year 2027 Open Season highlights · OPM FEHB premiums · OPM How the COLA is determined · Federal News Network · SSA 2027 COLA announcement · SSA COLA information · TSCL COLA Watch · CSRS and FERS COLA history · Colorado DOR, Social Security, Pensions and Annuities