(Updated Sept. 13 with latest inflation figures.)

The release of August inflation figures on Sept. 13 marked the second of three Department of Labor announcements determining how much military retiree pay will increase in 2023 – a system that may be confusing for many, especially with the media’s inflation coverage often citing different figures, metrics, or benchmarks.

MOAA’s COLA Watch offers readers a monthly update on the statistics determining the annual military retiree pay increase, but as the end of the fiscal year approaches, it’s a good time for a quick primer of what to expect and when.

[RELATED: Record Pay Increase Likely for Disabled Veterans and Military Retirees in 2023]

COLA 101

The cost-of-living adjustment (COLA) applied to military retirement pay, Social Security pay, VA disability pay, and similar federal payouts has its roots in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a variation of the standard CPI calculation. While you may hear about CPI in news reports citing inflation numbers, the CPI-W figure is the only one used in retiree-pay COLA calculation.

The math goes like this:

• Find the average of the CPI-W figures for July, August, and September.
• Subtract the previous year’s average from that three-month period from the current year’s average.
• Divide that figure by the previous year’s figure, to determine the percentage increase.

In 2021, for example, the July (267.789), August (268.387), and September (269.086) led to a three-month average of 268.421. Subtract the previous year’s three-month average (253.412) to get 15.009, and divide that by the previous year’s average to get a 5.9% increase.

What’s Next?

While CPI-W figures from the first nine months of the fiscal year can indicate inflation trends and help predict the COLA increase, only the last three are used in the actual calculation. A range of COLA predictions after this year’s July figure of 292.219 – 8.9% above the FY 2021 baseline – put the final figure between 8% and 10%; anywhere in that range would mark the highest increase in this metric since 11.2% in 1981.

It's important to note military retirement adjustments were not always linked to this CPI-W calculation, and retirees did not receive an 11.2% raise in 1981, though Social Security recipients did. This Congressional Research Service (CRS) report (PDF download) recaps how the current COLA setup took form, and this MOAA.org article outlines some of MOAA’s advocacy efforts helping to shape that setup.

The release of the August CPI-W figures on Sept. 13 showed a slight dip at 291.629, 8.6% above the FY 2022 baseline. The September figures will come out Oct. 13, and the COLA rate will be set.

MOAA’s Involvement

MOAA provides the COLA Watch and COLA news updates to keep members aware of trends as they consider future finances. But there’s another reason to pay attention, especially as adjustments reach near-record levels – past Congresses have attempted to ratchet down retirement pay increases as a cost-saving measure.

A recent example came in late 2013, where a continuing resolution reduced COLA for military retirees by 1%. MOAA and other organizations in The Military Coalition – dozens of groups representing nearly 5.5 million combined members – successfully joined forces in a push to repeal this change; Congress reversed itself in a matter of weeks.

This is far from the only example: A 2010 presidential commission, for instance, offered a plan to eliminate military retiree COLA for all retirees under age 62. The plan didn’t survive a final commission vote.

MOAA continues its decades-long work with Congress to make clear the damage such changes can do to an earned benefit and to the finances of individual retirees and their families. Keep up with these efforts and others at MOAA’s Advocacy News page.