2012 COLA for Retired Pay

COLA Explained
Each year Military Retirement pay, VA Compensation and Pensions, and Social Security benefits are adjusted for the rate of inflation. This annual Cost of Living Adjustment is determined by the Consumer Price Index for the previous year. In a normal cycle the CPI for a given year is compared to the previous year to determine the actual rate of inflation. However, since 2008 was the last year the rate of inflation was positive, it is the baseline for determining the 2012 rate of inflation.

For example, the 2012 COLA will be based on the 2011 rate of inflation. The 2011 rate of inflation was up 3.6% when compared to 2008, therefore there will be no COLA for Fiscal Year 2011.

Note: Retiree Cost of Living Adjustment (COLA) differs from the Active Duty Cost of Living Allowance which is paid based on the cost of living in a given high-cost locality. This number will be released in late December.

More on Retiree COLA  from DFAS:

Cost-of-Living Increases: Perhaps the most common change to retiree pay accounts are the Cost-of-Living (COLA) increases. Currently, federal law authorizes periodic increases to reflect rises in the Consumer Price Index (CPI). COLA increases impact your monthly gross pay, federal withholding tax, SBP premiums and annuities. While DFAS does not establish COLA increases, the agency does apply any authorized increases to your pay, SBP premiums and other account information.

COLA is applied depending on your date of entry into the armed forces and your date of retirement. If you entered service on or after Sept. 8, 1980, and became eligible for retired pay on or after Jan. 1, 1996, any authorized COLA will be decreased during your first calendar year of retirement. Full COLA increases will be applied for all subsequent years. Retirees who entered military service on or after Aug. 1, 1986 and opted in for the Career Status Bonus (CSB/Redux retirement plan), will have any authorized COLA increases reduced by 1 percent.