Is Your Pension Too Big to Fail—Or Too Big to Fund?

August 01, 2025

Every federal employee counts on their pension.

But quietly, Washington may be preparing for something no one wants to say out loud:

Your pension is starting to look more like a budget problem than a retirement benefit.

And when the government looks for “savings,” line items that seem secure (like your pension) could be on the chopping block.

The Guarantee That Isn’t Guaranteed

Federal pensions aren’t backed by an account with your name on it.

They’re backed by:

  • Future tax revenue

  • Political goodwill

  • And annual budget approvals

In other words—they’re only as safe as next year’s Congress feels generous.

In fact, there are 3 quiet changes already on the table.

These proposals aren’t theories. They’ve appeared in multiple recent budget drafts:

  • COLAs tied to Chained CPI, not actual inflation

  • “High-3” becoming “High-5” (meaning lower monthly annuities)

  • Higher FEHB premiums for retirees under “modernization” language

None of these cut benefits overnight. But each one trims the edges. And edges compound.

What Does a Trimmed Pension Look Like in Real Life?

Let’s run a quick thought experiment—right here in your inbox.

💥 SCENARIO A: COLA Compression

Assume:

  • $40,000/year pension

  • Inflation at 3.5%

  • COLA capped at 2%

After 10 years: You’ve lost over $5,000/year in purchasing power. That’s equivalent to 2 months of groceries—or 1 FEHB premium per year.

💥 SCENARIO B: High-5 Instead of High-3

Let’s say your high-3 is $110,000… but your high-5 average is $105,000.

That subtle shift alone could lower your pension by $100–$150/month—every month, for life.

That’s $36,000+ over a 25-year retirement.

💥 SCENARIO C: Healthcare Cost Shifts

If FEHB cost-sharing changes (as has been suggested), even a 5% increase in retiree premiums could mean an extra $800–$1,200/year out of pocket—with no increase in benefits.

The Bottom Line

Your pension won’t vanish. But it may be eroded in ways that never make headlines.

These aren’t dramatic cuts. They’re quiet adjustments.

The kind you don’t notice until they’re permanent.

Talk soon,

—FWR