Q. What happens if your area’s locality rate increases and you are retired? Will you benefit from the new locality rate as long as you are receiving it from the same area? For example, Norfolk is supposed to have a locality rate change. I retired in 2016. If the locality rate changes, will I receive more retirement?
A. Absolutely not. That’s because they are based on different laws. Annual cost-of-living adjustments for retirees are determined by the average Consumer Price Index for Urban Wage Earners (CPI-W) for the third quarter of each year over the third-quarter average for the previous year. Pay increases for employees, if any, start with recommendations from the President’s Pay Agent, which are based on data supplied by the Bureau of Labor Statistics. However, the increases actually paid have usually been reduced by the White House.
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The good news is that your locality pay factors in toward your FERS pension. So if you worked your “high-3” in Houston (one of the larger locality pay areas), you could then retire up the road to East Texas (which has lower property values) and do quite well. (My plan, though I’ll actually retire from DFW)