Inflation figures released last week will be the first of three monthly numbers used to calculate next year’s cost-of-living adjustment (COLA) for military retirees, Social Security and VA disability recipients, and other federal beneficiaries – and they could point to a smaller-than-anticipated increase.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for July was 3.1% higher than the yearly baseline, according to figures released Aug. 12. That’s the same percentage as June, and it’s down half a percentage point from May’s 3.6% – the biggest figure of the fiscal year.

[SEE THE CHART: MOAA’s COLA Watch]

A key projection released after the Aug. 12 data went public predicts a 3.6% COLA, down 0.2 percentage points from the previous month’s projection. That would be the largest adjustment since the 8.7% boost in 2023, which was driven by post-COVID inflation.

Longer-term predictions by the Congressional Budget Office released in February as part of a wide-ranging economic outlook point to smaller increases in the coming years, with COLA averaging 2.3% from 2029 to 2036.

The average of CPI-W figures from July, August, and September are used to set the new COLA. Retirees will know the adjustment after the September figures are released in mid-October.

Why It Matters

Inflation-based adjustments to military retirement pay are necessary to maintain the value of this service-earned benefit. And while there has been little legislative movement in recent years to adjust the COLA mechanism, that hasn’t always been the case:

• Total Elimination: The president’s FY 1987 budget proposed eliminating military retiree COLA. Thanks in part to advocacy from MOAA (then The Retired Officers Association, or TROA) and fellow stakeholders, Congress passed a budget that restored retiree COLAs into the 1990s.
  
  
• Delays: Early 1980s legislation delayed COLA effective dates by a month for three straight fiscal years (1983-85).
  
  
• Deferments and Reductions: A 2010 proposal from the National Commission on Fiscal Responsibility and Reform suggested deferring military retiree COLA until age 62, and a 2013 continuing resolution reduced COLA for military retirees under age 62 by 1%. MOAA and fellow members of The Military Coalition were active in successfully combating these efforts.

The bottom line: These adjustments cannot be taken for granted, especially as lawmakers look for ways to cut into growing deficits. MOAA continues to track this issue as part of its long-standing work to protect the value of all service-earned benefits; keep up with other key issues by registering at our Legislative Action Center.