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What do inflation and market conditions mean for FEDERAL EMPLOYEES in 2023?

What do inflation and market conditions mean for FEDERAL EMPLOYEES in 2023?

July 25, 2022
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What do inflation and market conditions mean for FEDERAL EMPLOYEES in 2023?

On July 13, the U.S. Bureau of Labor Statistics reported that the consumer price index (CPI), increased 1.3% from May to June of 2022. Inflation has risen to 9.1% since June of 2021, its highest level since 1981. The Federal Reserve (FED) will have its next meeting on July 26-27. Analysts are now projecting that the FED may raise its target fed funds rate by 0.75% to 1.00% at its upcoming meeting.

Furthermore, the country may soon find itself in a recession, which is defined by two consecutive quarters of negative GDP growth. Some major banks including Bank of America are already predicting that the U.S. will fall into a recession this year. Additionally, here are some key points for federal employees to consider:

1. The financial markets continue to struggle. As of July 15, the following are the year-to-date rates of return for the individual funds available to TSP participants:

  • G Fund: 1.15%
  • F Fund: -10.08%
  • C Fund: -19.96%
  • S Fund: -27.92%
  • I Fund: -18.95%

2. As inflation continues to rise, federal employees are left wondering if Congress will approve an increase in federal wages for 2023. Estimates are currently projecting a 4.6% wage increase for Federal Employees and military personnel based on the White House’s budget proposal from earlier this year. If approved by Congress, this would mark the largest federal wages increase in 20 years.

3. The federal pension system is a keystone for many retired federal employees when it comes to their financial well-being in retirement. As of July, federal retirement benefits such as CERS/FERS, stand to increase 9% in cost-of-living adjustment (COLA) in 2023. This would surpass the largest historical pension increase of 8.7% which occurred in 1982.

4. Social security could also see a significant adjustment in 2023. According to The Senior Citizens League, estimates for the Social Security cost-of-living adjustment (COLA) are 10.5% for 2023, based on the CPI data published on July 13. The actual adjustment will be determined by the Social Security Administration (SSA) based on inflation rates in the coming months. The SSA will officially announce upcoming changes for the 2023 COLA in mid-October of 2022.

Have any questions about the above topics or on how the economic landscape will impact your wealth? Our team of Fiduciary Financial Advisors can help answer your federal employee questions and help you navigate the opportunities available to you!

We are PlanVest Financial, Inc – a Registered Investment Advisory firm. Advisors on the PlanVest Federal team hold various designations such as CERTIFIED FINANCIAL PLANNER™ (CFP®) and/or Chartered Federal Employee Benefits Consultant (ChFEBCâ„ ). Our team proudly continues to serve former & current federal employees.

We offer no-cost, no-obligation consultations with our federal advisory team along with a free Federal Employee Benefits Analysis Report.

Send us a message or learn more by visiting us online at:

Federal Employee Benefits Analysis Report

All the best,

The PlanVest Federal Team


Sources:

  • Burns, T. (2022). Five takeaways from the stunning inflation numbers. The Hill. https://thehill.com/policy/3557459-five-takeaways-from-the-stunning-inflation-numbers/
  • Domm, P. (2022). Traders are betting the Fed could raise interest rates by a full percentage point this month. CNBC. https://www.cnbc.com/2022/07/13/traders-bet-the-fed-could-raise-interest-rates-by-1percent-this-month.html
  • FEDweek. (2022). Federal Retirement COLA Count Hits 9 Percent. FEDweek. https://www.fedweek.com/fedweek/federal-retirement-cola-count-hits-9-percent/
  • Konish, L. (2022). Social Security cost-of-living adjustment could be 10.5% in 2023, according to new estimate. CNBC. https://www.cnbc.com/2022/07/13/social-security-cost-of-living-adjustment-could-be-10point5percent-in-2023.html
  • My Federal Retirement. (2022). 2023 Federal Retiree COLA Watch. My Federal Retirement. https://www.myfederalretirement.com/fers-csrs-cola-watch/
  • Smith, R. (2022). 2023 Federal Pay Raise, Inflation, and Wishful Thinking. Fed Smith. https://www.fedsmith.com/2022/06/22/2023-federal-pay-raise-and-inflation/?utm_source=fedsmith-newsletter&utm_medium=email&utm_campaign=fedsmith-2022-07-15&utm_content=related-link&utm_term=html
  • Smith, R. (2022). Inflation Rate, 2023 COLA, and Why TSP Dropped Dramatically in One Day. Fed Smith. https://www.fedsmith.com/2022/06/10/inflation-rate-2023-cola-why-tsp-dropped/?utm_source=fedsmith-newsletter&utm_medium=email&utm_campaign=fedsmith-2022-07-15&utm_content=related-link&utm_term=html
  • Thrift Savings Plan. (2022). Rates of Return. TSP. https://www.tsp.gov/fund-performance/
  • U.S. Bureau of Labor Statistics. (2022). Table 4. Consumer Price Index for All Urban Consumers (CPI-U): Selected areas, all items index. U.S. Bureau of Labor Statistics. https://www.bls.gov/news.release/cpi.t04.htm