The 2023 military retirement pay increase (aka retired COLA) has been calculated, and it’s a whopping 8.7% for those who retired prior to 2022! This projected increase is based on the Social Security cost-of-living adjustment. The Social Security adjustment changes the VA disability compensation rates by law. For military, retired COLA adjustments don’t happen automatically by law, but it has always been increased by the same amount.
This post talks about the annual cost-of-living adjustment that is applied to military retirement pay and other federal benefits such as Social Security payments and VA disability payments. It has nothing to do with the military’s cost-of-living allowance paid to active duty military members who are serving in areas with a high cost of living.
So, what does this mean for your military retirement paycheck?
If You Retired Prior To 2022
If you retired before 1 January 2022, then you can take your gross retirement pay from 2022 and multiply it to 1.087 to see how much you will receive in 2023. This is the gross amount of your retirement pay before any deductions for anything.
It looks like this on your Retiree Account Statement (RAS):
Keep in mind that if you elected the Survivor Benefit Plan (SBP), SBP premiums will also increase by the same percentage so that your total premium remains 6.5% of the covered amount. You will likely also see increases in your income tax withholding.
If You Retired in 2022
In the first year of military retirement, your retired COLA adjustment is pro-rated. This is so that you don’t benefit from both the prior year’s military pay increase and the new cost-of-living adjustment. It’s an imprecise equation and many people would like to see it changed, but it is the law for now.
The pro-rating is calculated yearly and hasn’t been released yet. I’ll update this chart when it is released. In the meantime, you can read more about this in the DoD’s Financial Management Regulation, Volume 7B, Chapter 8 and see last year’s memo and rates: Adjusted Cost of Living Memorandum.
| Month of Retirement | 2022 COLA for 2021 Retirees |
|---|---|
| January through March | 5.7% |
| April through June | 4.4% |
| July through September | 1.8% |
| October through December | 0.0% |
Career Status Bonus/Redux Retirees
Those of you who elected the REDUX retirement plan receive a smaller cost-of-living adjustment each year, 1% less than the full adjustment. That’ll still be a lot this 2023 – 7.7%.
Redux retirees do have this unique one-time adjustment at age 62 that brings them up to the retirement pay they would receive without the reduced cost-of-living adjustment. Thereafter, they continue to receive the reduced adjustment each year.
VA Disability Compensation
Disability compensation paid by the Department of Veterans Affairs will also increase in 2022, also by 8.7%.
Survivor Benefit Plan Payments
Payments received from the Survivor Benefit Plan will also increase by the same percentage. Your specific amount will depend on the amount of SBP received.
These increases reflect the increase in the cost of goods and services as calculated by the Consumer Price Index. While it’s not perfect, it is the formula that is used.
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Thank you for the information. I was not aware of the retirement date differential equation. My retirement date will be 30 Nov 21. My 20 and 21 active pay raises were for those working years. My 2022 COLA increase as a retiree is to keep my retirement annuity from losing purchasing power. Will I be getting any raise on 1 Jan 22? Is there some place you recommend I go look online that will show me what my annuity will be then? Thank you for your reply and thanks for the information you provide.
Jeff
We won’t know for sure until the final figures are published, usually sometime in November.
I like the Military Retirement app available for a small cost via your smart phone. It has a blue background with a blue, white and red umbrella on it. I’ve found it to be accurate for calculating military retirement pay.
Thanks for the great info, Kate!
Anything for you, my friend!
Thanks, always a great resource. First I had heard about reduced percentages for those retiring in 2021. Thanks very much.
Do I read it right that proration of COLA in first year of retirement is covered by Title 10, subtitle A, Part II, Chapter 71 subsection 1401a? And specifically for a high-3 retiree in FY22 – specifically paragraphs (d) and or (e)?
I retired August31/Sept 1 and am trying to make sense of a paltry 1.8% (I think) COLA adjustment. I read somewhere that 1401a proration was written to prevent retirees from benefiting from both an active duty pay raise (presumably matched to inflation?) and a COLA pay raise. I think CY22 military pay was something like a 2-3% raise while Social Security for CY2022 went up something like 5.9%. Either way, seems like the law as written penalizes anyone for planning to retire any month other than Dec/Jan and assumes that you have a crystal ball to predict inflation when one has to let leadership know up to a year in advance of intention to retire…to avoid getting cost PCS orders that technically can preclude one from getting a retirement request approved (at least in the Navy).
Sam, I’m tired and I’m not going to verify which section of the code it’s listed in. But yes, first-year retirees do not receive the full COLA unless they retire at the beginning of the year. As you said, this is to prevent them from benefitting from both the AD pay raise and the full COLA. There’s really no way to see it as a “penalty” if you think about (and even math out) how the AD pay raises factor into your High 36.
Does it result in variations in individual retirement amounts based on when you retire? Sure. Are those variations significant in the greater scheme of things? Not in my opinion. Timing retirement to “maximize” COLA would mean that you discounted every other factor that goes into picking a retirement date – and obviously that would be silly. SM, spouse, and child educational programs, spouse employment, post-military education or employment, other family needs, high year tenure, job requirements, medical issues, even social plans all contribute to what’s best for you. IMO all those things are more important than maximizing that first year’s COLA. Life is about more than money.
Some years, the COLA is significantly more or less than the AD pay raise from the previous year. This happens to be one of those years where COLA was a LOT more than the AD pay raise. But that is just a coincidence and there isn’t anything nefarious at play.