Life Capitalized Financial

Newsletter · Federal Retirement

One Month Left. Your 2027 Raise Just Got Clearer.

By Troy Barrow · · Originally sent to Life Capitalized Financial newsletter subscribers.

Time-sensitive: This was a market, inflation, and federal-benefits brief written after the August 2026 CPI-W release. COLA estimates, TSP returns, and federal pay proposals described here can change. It is preserved as published.

This week brought a number worth your attention.

The Bureau of Labor Statistics released August inflation data on September 11. It showed CPI-W up 3.5% over the past year, a step up from July's 3.4%. That reading fills in two of the three months used to calculate your 2027 cost-of-living adjustment.

With July and August locked in, the running range for CSRS retirees and Social Security recipients sits between 3.3% and 3.6%. September data was still pending at publication, and the Social Security Administration announces the final number on October 14.

If you are FERS, pay attention here. Your COLA works differently, and many people do not find out how until it hits their bank account.

The FERS diet COLA, explained

I grew up watching my family prep for hurricane season every year, even the quiet years. You do not wait for the storm to show up on radar. You check the shutters and stock the water in June, because September always comes.

Inflation works the same way. It does not announce itself with a siren. It shows up slowly, in the cost of groceries, insurance, and the doctor visits that come more often as you get older. A diet COLA that runs a point behind inflation for years in a row is a slow leak, not a single storm. And a pay-freeze year for current employees means your final high-3 salary calculation may not grow the way you planned either.

Review federal and postal retirement planning services.

What else moved this week

TSP investors got good news. Every fund posted gains in August, with the I Fund leading at 3.32%. The G Fund earned 4.875%.

On pay, the president formally proposed a zero percent raise for most federal employees on August 28. Law enforcement personnel are carved out under separate authority and will get 3.8%.

A few honest takeaways

  • Do not assume your COLA covers your real cost increases. It is built to track a general inflation basket, not your specific bills, especially healthcare.
  • FERS retirees should plan around the one-point gap every year the COLA exceeds 2%. It is permanent, not a one-time cut.
  • A strong G Fund rate feels safe, but parking everything there long term carries its own inflation risk. Cash that does not grow loses ground quietly.
  • If you are still working, a pay-freeze year is a good year to double-check your TSP contribution rate rather than count on a raise to fund it.

Some folks tell me, "My COLA adjusts every year, so I am covered." That is true as far as it goes. But covered against last year's inflation is not the same as protected against a lifetime of it, especially with FERS paying a point less than everyone else, year after year. The plan that gets you through year one of retirement is not automatically the plan that gets you through year twenty. That is worth a real conversation, not a guess.

Read the OPM interim pay decision guide.

Stay ready

  • Review your plan annually with a fiduciary advisor.
  • Keep income sources diversified across taxable, tax-deferred, and tax-free accounts where appropriate.
  • Do not rely on one income stream.

Sources

The information shared is general education and not personal advice or a recommendation. Past performance never predicts future results. Consult qualified tax, legal, and financial professionals for guidance specific to you.

Investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member SIPC, 1-800-873-7637, www.htk.com. Life Capitalized Financial LLC is not affiliated with HTK. The material is not intended to be a recommendation, offer or solicitation. HTK does not provide legal and tax advice. Always consult a qualified tax advisor regarding your personal tax situation and a qualified legal professional for your personal estate planning situation.

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