Projections for the 2027 cost-of-living adjustment (COLA) made to uniformed services retirement checks, Social Security and VA benefits, and other federal payments rose considerably after the May 12 announcement of April’s inflation figures.

Here’s a bit more about the projections, plus a look at MOAA’s role in protecting the value of service-earned retirement pay and VA compensation.

[SEE THE CHART: MOAA’s COLA Watch]

The New Numbers

One group’s estimate put the COLA at 3.9%, while an independent analyst predicted a 4.2% hike, according to a CNBC report.

Both are up at least a percentage point from the previous month’s projections, and either would be the largest increase since the 8.2% added to checks in 2023.

The increase has only topped 4% three other times since 2000: A 5.9% hike in 2022, a 5.8% increase in 2009, and a 4.1% boost in 2005.

Making Sense of the Math

The updated projections factor in the May 12 inflation report, which included April’s Cost of Living Index for Urban Wage Earners and Clerical Workers (CPI-W), the metric used to calculate the annual COLA. That April figure was 2.9% above the fiscal year baseline, up from 2% in March and the highest April percentage since 2022 (6%).

March’s 2% increase was the first time this year’s COLA track outpaced last year. The 2.2 percentage-point increase over the past two months is the largest two-month jump since a 3 percentage-point increase from April to June 2022 (6% to 9%).

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The monthly CPI-W figures track inflation trends, but they won’t be used to calculate the adjustment until the end of the fiscal year, when the average of the July, August, and September figures is compared against the baseline to set the COLA. MOAA’s COLA Watch page breaks down the math. 

Two Reasons to Track

COLA information can help military retirees, Social Security recipients, and others set their budgets for the new fiscal year, with COLA-adjusted payments serving as a hedge of sorts against inflation. While MOAA provides these figures for those purposes, its interest in COLA goes beyond financial planning: Lawmakers have attempted to reduce COLA in previous years, weakening a service-earned benefit.

While there are no pieces of legislation under consideration that would modify COLA, the issue likely will be raised later this year, as the Congressional Budget Office report offering deficit-reduction options to members of each new legislative session regularly includes COLA-related content.

The 2024 report includes a proposal that would change how the COLA is calculated, resulting in more than $278 billion in deficit reduction through 2034 … with some of those savings on the backs of military retirees.

[RELATED: Retirement Resources From MOAA]

Lawmakers have threatened service-earned retirement COLA over the years, including a plan in 2013 that would have reduced the military retirement COLA by 1%. The move would’ve cost an O-5 retiring after 20 years of service $124,000 before age 62. MOAA joined with fellow members of The Military Coalition (TMC) in successful opposition to the change; the TMC formed in response to 1985 legislation that suspended military retirement COLA increases entirely.

A higher COLA presents a more tempting target for lawmakers looking for ways to reduce the deficit. MOAA stands ready to stall any such attempts before they start – preserving this adjustment, and the purchasing power of these benefits, remains a core tenant to our advocacy work.

Keep up with the latest on this and other MOAA advocacy efforts by registering at our Legislative Action Center.