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COLA vs Workers Pay Raise: What is the difference?

What is the difference between COLA and workers pay raise?

cost of living adjustments

Here we will explain the key differences.


IRS: What is the saver’s credit and who is eligible?

COLA- Cost of Living Adjustments

COLA is an annual raise given to retirees. Each year the raise is based on a pricing index that reflects inflation. The index that is used to calculate the raise is the CPI-W, which is the consumer price index for urban wage earners and clerical workers. The CPI-W is used to calculate the average price change for goods and services.

How the increase will impact you depends on your pension type– both CSRS and FERS are impacted. A retiree must have received their pensions for a full year before getting the COLA. However, you may qualify for a partial adjustment depending on how long you’ve been receiving benefits.

Workers pay raise

Active federal employees get an annual pay increase in a different way. Each year the President proposes a salary raise to Congress that they can then approve or amend. This tends to be a lengthy and politically charged process.

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IRS: What is the saver’s credit and who is eligible?

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