The 8.7% Cost-of-Living Adjustment (COLA) will also apply to CSRS and CSRS-offset retirees while FERS retirees will see a COLA of 7.7%.
As predicted a few weeks ago, the 2023 COLA has officially been revealed at 8.7% for Social Security recipients. This means the COLA for federal retirees who receive a CSRS or CSRS-offset pension will also see a 8.7% boost. Because those who retired under FERS get 1% less when the annual COLA is 3% or higher, pension checks distributed from the FERS system will experience a COLA of 7.7%. The 8.7% figure is the highest COLA since 1982, when the adjustment was 7.4%, and FERS did not yet exist.
What if I Retired This Year?
While Social Security recipients receive the full adjustment even if they first claimed Social Security during the same calendar year, FERS and CSRS retirees who entered retirement in 2022 will see the upcoming COLA prorated. If you retired in January, your pension will see 11/12ths of the 8.7% or 7.7% increase. Retiring in February would mean 10/12ths of the COLA can be expected, and so on.
It is also important to remember that unless you retired under FERS with special provisions or under disability, there is no COLA if you are not yet age 62. If you turned 62 this year, but have been retired the whole year, you can expect the full COLA and not a prorated one.
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2023 Pay Raise, and More
With the COLA for next year now in the books, this doesn’t have much effect on active federal workers. The pay raise for current employees is strongly expected to be 4.6% on average, but there’s still a slight chance that Congress or the White House could finalize the raise either higher or lower. Representative Gerry Connolly has been pushing for a 5.1% federal pay raise in 2023 since February. The 2023 TSP Contribution Limit is also not official yet, but estimates believe it will increase to $$22,500.
Medicare B Premiums are also set to decrease 3%. As these premiums are deducted from Social Security benefits, those who utilize both could see a net boost of 11.7% to their Social Security checks. On the other hand, FEHB premiums and FEDVIP premiums will undergo an average increase.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.