This article originally appeared on Military.com. Follow Military.com on Twitter.
Military retirees and disabled veterans will see their monthly checks increase by 8.7% for 2023, thanks to an annual adjustment to the federal Cost of Living Allowance (COLA) due to inflation.
This will be the largest increase since 1981 Retirees saw a 5.9% increase in 2022 and 1.3% in 2021; the annual adjustment has averaged 1.9% for the last 10 years.
The COLA increase was announced Thursday by the Social Security Administration. Most government disability and retirement payments are required by law to increase annually by the same amount.
Retirement pay increase
For 2023, retired military members will see a $87 increase for each $1,000 of military retirement pension they receive each month.
Retirees who entered military service on or after Aug. 1, 1986, and opted for the Career Status Bonus (CSB/Redux retirement plan) will have any COLA increases reduced by 1%, so they will see a smaller increase of $77 per $1,000 in 2023.
Survivors receiving Survivor Benefit Plan payments will see their payments increase by the same amount as retirees.
Service members who retire in 2022 will see a slightly reduced COLA in 2023. Their COLA is prorated based on which quarter they retired in (Jan. – March; April – June; etc.). The prorated amount may also be adjusted based on when a member entered the service and which retirement plan they elected.
VA disability increase
Disabled veterans will also see their benefit payments increase in the upcoming year. The average VA disability check will go up about $13.28 per month for those with a 10% rating, and $289.89 for those rated at 100%.
Other federal retirees and beneficiaries
Military retirees and VA beneficiaries aren’t the only ones who benefit from the COLA increase. Civil Service retirees and Social Security recipients also will see the 8.7% jump in their monthly checks.
For Social Security recipients, the monthly increase will mean an extra $145 per month for the average beneficiary.
How the COLA is determined
Each year, military retirement pay, Survivor Benefit Plan Annuities, VA Compensation and Pensions, and Social Security benefits are adjusted for the rate of inflation.
The Department of Labor determines the annual COLA by measuring the Consumer Price Index (CPI), a measurement of a broad sampling of the cost of consumer goods and expenses. The CPI is compared to the previous year; if there is an increase, there is a COLA. If there is no increase, there is no COLA; benefits will remain the same – not decrease.
The COLA increase affects about one in every five Americans.
Retirement and VA disability pay offset
Military retirees with combined VA disability ratings of 40% or lower whose injuries are not combat related can only receive that amount in either their retirement pension or their disability check – but not both. That rule is known as an “offset” and is a matter of law. Since disability pay isn’t subject to the federal income tax but retirement pay is, most veterans elect to receive it instead of their retirement pension for the offset amount.
That means even though both retirement and disability payments will see the COLA increase, some veterans will benefit from only one, not both.
