Welcome, fellow military retirees! We all know that military retirement can be a challenge. With the changing economy and the ever-shifting landscape of COLA, it can be hard to keep up. That's why we're here today - to give you the low-down on what all military retirees should know about COLA in 2023.

2023: What All Military Retirees Should Know About COLA

As a retired member of the military, you are probably already familiar with the term “COLA”, or cost of living adjustment. This is a percentage of a retiree’s basic pay that is adjusted each year to keep up with inflation. As of June 2021, the COLA for military retirees will increase by 2.6%. This is the first COLA increase since 2018. It’s important to know what COLA means for you and how it affects your retirement benefits.

What is COLA?

COLA stands for Cost of Living Adjustment. It is a percentage of a retiree’s basic pay that is adjusted each year to keep up with inflation. COLA was first implemented in 1972 as part of the 1972 Military Pay Act. It was designed to ensure that military retirees would not lose purchasing power due to inflation. COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a measure of the average change over time in prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services.

How Does COLA Affect Military Retirees?

COLA affects military retirees in two ways. First, the COLA amount is used to increase the monthly retired pay of those who retired before August 1, 1986. The amount of the increase is based on the percentage of the COLA increase. Second, the COLA amount is used to increase the retired pay of those who retired on or after August 1, 1986. However, the increase is limited to the amount of the retired pay that is based on the retired pay base rate. This means that the COLA amount will not increase the portion of the retired pay that is based on longevity of service or the portion that is based on special pay.

What Does the 2021 COLA Increase Mean for Military Retirees?

The 2021 COLA increase of 2.6% means that military retirees will see an increase in their retired pay. For those who retired before August 1, 1986, the increase will be 2.6%. For those who retired on or after August 1, 1986, the increase will be limited to the retired pay base rate, which is currently set at 2.6%. This means that all military retirees will see an increase in their monthly retired pay starting in June 2021.

What Should Military Retirees Do in Response to the 2021 COLA Increase?

Military retirees should take advantage of the 2021 COLA increase by making sure that their finances are in order. This includes making sure that their budget and expenses are in line with their income. It is also important to make sure that their investments are properly diversified and that they are taking full advantage of any tax benefits that are available to them. Finally, it is important to make sure that their retirement plan is in order and that they are taking full advantage of any retirement benefits that are available to them.

What Else Should Military Retirees Know About COLA?

First, military retirees should know that the COLA rate is adjusted each year. The rate is based on the CPI-W, which is an average of changes over time in prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services. The CPI-W is used to calculate the COLA rate, which is then used to adjust the monthly retired pay of military retirees.

When Does the 2021 COLA Increase Take Effect?

The 2021 COLA increase will take effect on June 1, 2021. This means that military retirees will see an increase in their monthly retired pay starting in June. It is important to note that the COLA increase will not be reflected in retirees’ annual Social Security statements. Instead, the increase will be reflected in retirees’ monthly retired pay starting in June 2021.

Example

For example, if a military retiree had a monthly retired pay of $2,000 before the 2021 COLA increase, the retiree’s monthly retired pay will increase to $2,052 (2.6% of $2,000) after the 2021 COLA increase.

Point of View

The 2021 COLA increase of 2.6% is a welcome change for military retirees who have seen their purchasing power erode due to inflation. This increase will help to ensure that military retirees are able to maintain their standard of living and continue to enjoy the benefits of retirement. Additionally, the COLA increase will help to ensure that military retirees can continue to make progress toward their financial goals.

The 2021 COLA increase is an important reminder of the importance of planning for retirement. Military retirees should take full advantage of the COLA increase and use it as an opportunity to review their financial plan and make sure that they are taking full advantage of the benefits of retirement. By taking the time to plan for retirement, military retirees can ensure that they are able to enjoy a secure and comfortable retirement for years to come.