How Does the Military Retirement COLA Work?
Pursuant to 10 U.S. Code § 1401a, military retirement is subject to an annual Cost of Living Adjustment (COLA) based upon the Consumer Price Index. However, one caveat – if the COLA would be under 1%, the retirement is not increased that year, but instead is “banked” and the retirement is only increased once the cumulative COLAs would exceed 1%, hence there have been years when certain retirees don’t actually receive a COLA. (See the history of COLAs from 1998 to present from the Department of Defense for year-by-year specifics).
The military retirement COLA is based upon the calculations used by the Social Security Administration, and the same COLA applies to most federal retirees, Social Security recipients, VA disability, and military retirement.
The 2020 Military Retirement COLA
Former spouses who are receiving a percentage share of the military retirement (the overwhelming majority of former spouses) will also see the same 1.6% increase. If the former spouse is receiving his/her share of the retirement directly from DFAS due to having more than 10 years of service, neither the retiree nor former spouse needs to do anything, as DFAS will automatically adjust the share.
However, if the retiree is paying the former spouse’s share himself/herself, then the retiree will need to adjust manually the monthly payment to factor in the cost of living adjustment.
See the article Understanding Military Retirement Pay in the Military Divorce Guide for a full explanation of the military retirement system.