Cost-of-living adjustment: What to know for this upcoming 2021

2021 arrives with changes. Among these changes is that service members who receive disability or other benefits from the Department of Veteran’s Affairs will benefit from a 1.3% increase in their monthly checks. Military retirees, federal retirees, and social security recipients will also see this increase.

Every year, specific benefits such as the military retirement pay, or VA compensation and pension are adjusted for the rate of inflation. As military retirement pay is one of the most important benefits of military service, understanding how it works and how to calculate it is essential.

The Department of Labor determines the annual cost-of-living adjustment (COLA) by measuring the Consumer Price Index (CPI), which is a measurement of a 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 cost-of-living adjustment, the COLA. If there is no increase, there is no COLA.

The COLA affects about one in every five Americans, including Social Security recipients, disabled veterans, federal retirees and retired military members. For instance, in 2020, the COLA increase was 1.6%.



In regard to the retirement pay increase, retired military members will obtain $13 more for each $1,000 they received monthly from the military retirement pension. Those who receive benefits from the Survivor Benefit Plan will see the same $13 per $1,000 increase. Civil Service retirees and Social Security recipients will also see the 1.3% increase in their monthly checks. However, those retirees who initiated the service on or after August 1st,1986, and decide for the Career Status Bonus (CSB/Redux retirement plan) will see their increase of COLA reduced by 1%, meaning their increase for 2021 will be smaller; $3 per every $1,000 they received monthly.

Now let’s talk about the VA disability benefit. Service members that receive benefits due to disability will also see an increase. The average check they receive will have an increase of $1.85 per month for those with a 10% rating, and $19.68 for those rated at 100%. For Social Security recipients, the monthly increase will be reflected in an $18.07 per month for the average beneficiary.

It is important to keep an eye on your benefits as military pay benefits change constantly. Being informed of the annual potential COLA will give you a better picture of what to expect when receiving your monthly check and what you should be receiving.