- Federal Employee's Retirement Planning Guide - https://fedretire.net -

The 2026 Landscape: What to Expect and Outlook

Posted By Dennis Damp On In ANNUITIES / ELIGIBILITY,BENEFITS / INSURANCE,ESTATE PLANNING,FINANCE / TIP,LIFESTYLE / TRAVEL,RETIREMENT CONCERNS,SOCIAL SECURITY / MEDICARE,SURVIVOR INFORMATION,WELLNESS / HEALTH | No Comments
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For those planning their retirement, it’s a good time to assess their financial situation [2], long before filing their retirement paperwork. Use our comprehensive Federal Employees retirement Planning Guide [3] to establish realistic retirement target dates, track your annual and sick leave [4], review your retirement benefit options, and estimate your annuity and other income.

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Federal Pay Raise

Federal employees received an overall 1 percent pay raise, with 2026 locality rates frozen at 2025 levels for employees under the General Schedule and certain other pay systems. The 2026 pay charts [6] are available for your review.

There are exceptions; the Office of Personnel Management (OPM) is using special pay authorities to provide an additional 2.8 percent pay increase for certain law enforcement officials, in line with a planned 3.8 percent military pay increase.

On the flip side, even though pay raises were limited, cash awards have increased dramatically in the federal sector to reward top performers. OPM’s new guidance [7] encourages larger bonuses (15-25% of pay) for exceptional employees. The more rigorous performance ratings reserve large bonuses for the highest achievers, while agencies shift from broad award distribution to incentivizing those who contributed significantly to the agency’s mission.

I’ve heard from several exceptional federal employees who were quite surprised to receive substantial cash awards this year.

COLA 2026

More than 71 million Americans will see a 2.8% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2026. Starting in January, Social Security retirement benefits will increase on average by more than $56 per month, increasing the average monthly payment to approximately $2,071.

Federal retirees under the Civil Service Retirement System (CSRS) will receive a 2.8% COLA [8] increase in their retirement annuities, while FERS retirees [9] will receive a 2% increase.

Thrift Savings Plan Considerations

The Thrift Savings Plan (TSP) [10] elective deferred contribution limit increased to $24,500 for FERS employees with an additional $8,000 catch-up contribution for those aged 50. The TSP’s Annual Additions Limit for 2026 is $72,000. This covers all contributions (your money + agency match).

These limits define the contributions that can be made to defined contribution accounts, such as the Thrift Savings Plan (TSP), for the calendar year. Please note, this is a personal limit that applies to an individual’s aggregated contributions across all such accounts in a calendar year.

If you aren’t currently contributing up to these limits, consider increasing your TSP contributions this year to at least half of your annual pay increase. Your take-home pay will still increase year to year with this modest contribution increase.

Your contributions are tax-deferred until you withdraw them in retirement, and they will reduce your annual income tax while still working.




Annuity Statements

Federal annuitants typically receive their updated Annuity Statement in late December, with the COLA increase added. OPM sends out updated annuity statements anytime there is a change that affects our annuity.

Next month, we will receive another paper statement showing FEHB healthcare and FEDVIP premium changes. The February statement will soon be available for download on their Retirement Services Website [11].

New statements are sent out throughout the year whenever there are changes to checking/savings allotments, income tax withholding, and long-term care insurance, etc.

The annual statement provides annuity and benefit information for you and your family. It includes:

If you misplace your annual statement, download a copy from OPM’s website along with the instructions, or contact OPM for a replacement. These statements also outline how to make benefit elections, such as applying for a survivor election for a spouse you marry after retirement, survivor annuity elections for a former spouse, and other information.

This document is a wealth of information, and I place this statement in my Estate Planning Binder for safekeeping.

Social Security Tax Limit and Medicare Premiums

Higher earners will pay Social Security taxes in 2026 on earnings up to $184,500. Both employees and employers will pay the 6.2% Social Security tax (OASDI) on earnings up to this amount, with any earnings above that threshold not subject to this tax.

The standard monthly premium for Medicare Part B [12] will be $202.90 for 2026, an increase of $17.90 in 2025. The annual deductible for all Medicare Part B beneficiaries rose to $283 in 2026. Visit our Medicare page [12] for a complete list of Part A and B premiums, including the 2026 Income Related Monthly Adjustment Amount (IRMAA).

Don’t Cut and Run Without an Annuity – Deferred and Early Retirements [13]

BLUE Book (Benefits Summary Booklet)

Request or download an updated retirement benefits booklet through https://www.servicesonline.opm.gov [14] from late January to early February. This will ensure they include your 2026 FEHB and FEDVIP premiums. All retirees receive a comprehensive multi-page pamphlet titled “Your Federal Retirement Benefits” from OPM when they retire. My booklet is 28 pages long. Request your updated copy by selecting the Document Section, the last item listed on the Dashboard’s main menu, and clicking on “Request Booklet.”

Many annuitants order or download a copy each year with updated benefits information and place the booklet in their retirement or estate-planning file. You can also request or download a copy of the original brochure you received when you first retired, if you lost yours, and compare it to the current version.

If you haven’t signed up for OPM’s Online Services, follow the sign-on guidance in my article “OPM Services Online Access Changes.” [15]

This booklet is a wealth of information and includes your personal retirement information, such as CSA number, annuity breakdown, survivor elections, benefit elections, etc. If you don’t have access to their online services, call OPM at 1-888-767-6738. You can also email them at retire@opm.gov [16] or send a written request to the U.S. Office of Personnel Management, 1900 E Street, NW, Washington, DC 20415-1000.

Outlook

Sign-up for a One-on-One Free Retirement Planning Consultation [5]

Many changes are in store for federal employees and annuitants as the new administration continues its push to rightsize and modernize the Executive branch.

The FAA is fast-tracking major automation updates across its system, OPM is restructuring operations, and most agency heads are tasked with finding ways to improve services with reduced staffing. A new focus to substantially reward top performers was initiated last year and the full effects of this effort will start with this year’s performance ratings.

Even with all of the uncertainty, federal employees are the backbone of the Executive branch and will continue to find ways to right the ship. I went through 4 major reorganizations during my career, and I believe this current reorganization may be the most significant in generations.

Disruption often creates opportunities, and federal employees who stay the course can make a difference and end up in the driver’s seat down the road.

Even with these uncertainties, retirees have COLA-adjusted annuities and Social Security checks to rely on, and you can expect considerably lower prescription drug costs [17] starting in 2026 due to the administration’s negotiations with major Pharma companies.

Retirees and employees alike have realized significant gains in their TSP and other investment accounts with the major indexes hitting all-time highs over a dozen times in 2025! Inflation is moderating, gas at the pumps has dropped precipitously since early 2024, payroll taxes have dropped this year, increasing everyone’s take-home pay, and manufacturing is returning to America, creating many new jobs.

Yes, change is coming at lightning speed; AI is on a rampage, and uncertainty abounds worldwide about the impact of these innovations. Yet, as with all past significant changes, the world adapts, and mankind thankfully continues to evolve and prosper.

I wish you and yours a happy, healthy, and prosperous New Year!

Helpful Retirement Planning Tools

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Disclaimer: The information provided may not cover all aspects of unique or special circumstances.  Federal regulations, medical procedures, investment information, and benefit details are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance, including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change.

The information contained herein may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult a financial, medical, or human resource professional where appropriate. Neither the publisher nor the author shall be liable for any loss or other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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