The 2024 cost-of-living adjustment (COLA) for military retirees, Social Security recipients, disabled veterans, and others receiving various federal benefits won’t be set until October, but a quick check of the trend lines show a significant gap between this year’s figures and last year’s.

A short primer: The annual COLA calculations stem from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an inflation measurement released monthly. The average CPI-W from July, August, and September is compared with the average of that period from the previous year to determine the increase.

In 2023, for example, that average rose 8.7% above the previous year’s baseline, triggering the largest increase in four decades.

[RELATED: MOAA's COLA Watch]

While CPI-W figures from earlier in the year won’t affect the calculations, they serve as a good indicator of where the adjustment could be heading. This year’s February figures, for example, were 1.1% above the baseline – less than a third of the increase from the same time last year.

Citing long-term trends, the nonpartisan Senior Citizens League said the 2024 COLA could end up below 3%. The same group raised the possibility of “no COLA payable” in 2024, should recessionary pressures trigger a deflation – that hasn’t happened since 2016.

Making Adjustments

“It’s tempting to base your financial plans on recent data, but a long-term outlook on most every financial topic, including COLA, generally works to an investor’s advantage,” said Lila Quintiliani, ChFC®, AFC®, MOAA’s program director for Financial and Benefits Education/Counseling. “COLAs over the past two years were well outside the norm, and plans should reflect that.”

Last year, Quintiliani offered inflation-busting advice and other suggestions for what retirees could do with their COLA-induced pay raise. This year, she said beneficiaries who are concerned about a smaller COLA bump have options to prepare:

• Double-check your safety net. Everyone should have an emergency fund, but with inflation uncertainty (and little chance for substantial COLA support), consider whether what you have set aside is enough.
• Let high rates help you. Make sure your short-term savings rest in a high-yield account – some interest rates are above 4%.
• Consider CDs. These common, longer-term savings vehicles could be a safe place to park some money you know you’ll be needing for a future purchase, or for longer-term interest accumulation. Be sure to read up on withdrawal rules and penalties – if you need to pull money out early to cover unexpected costs, you’ll likely wipe out any interest gains.

Protecting Your COLA

Just because the COLA boost may be less than recent years doesn’t make the adjustment itself any less of a target. A Congressional Budget Office (CBO) proposal at the start of the 118th Congress suggested the government could save a quarter-trillion dollars over 10 years by changing how it calculated COLA, moving to a different index which would erode the value of these benefits over time.

[RELATED: How ‘Chained CPI’ Would Reduce Your Military Retirement Benefit]

There has been no legislative movement in this direction, but with the administration’s FY 2024 budget proposal just a few weeks old, and with debt ceiling and other financial pressures mounting, there’s no clarity on what Congress could put in place. MOAA has fought similar COLA-reduction plans with great success over the years – you can read a recap of these battles, dating back more than four decades, at this link.

Keep up with the latest on this and other MOAA legislative priorities via MOAA’s Advocacy News page. And be sure to register at MOAA’s Legislative Action Center, so you can make your voice heard by contacting your lawmakers on issues of importance to the wider uniformed services community.