VA COLA vs. Military Retirement COLA: Decoding the Differences for Veterans
Posted by
Berry Law
on
January 17, 2025 in
Veterans
Are you a Veteran receiving both VA disability benefits and military retirement pay? Understanding the nuances of the Cost of Living Adjustments (COLA) for each can be crucial for maximizing your benefits. This is doubly true for those receiving both VA disability benefits and military retirement pay. While both benefits aim to support your well-being, each COLA is calculated and applied differently.
Understanding these key differences empowers you to maximize your hard-earned benefits, helping you secure the full support you deserve.
Unpacking the Calculations: How are COLAs Determined?
Both VA COLA and military retirement COLA are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation impacting consumer goods and services. This means that both benefits are adjusted to keep pace with the rising cost of living. Think of it like this: if the price of groceries, gas, and other essentials goes up, your benefits should go up, too, so you can still afford the things you need.
- VA COLA is directly linked to the Social Security COLA. When Social Security benefits see a cost-of-living adjustment, VA benefits typically follow suit, helping Veterans receive the same percentage increase. This is solidified by the Veterans Compensation Cost-of-Living Adjustment (COLA) Act of 2023, which guarantees VA benefits receive a COLA matching the one applied to Social Security benefits. This means that Veterans receiving VA benefits can be confident that their benefits will keep pace with inflation, just like Social Security recipients.
- Military Retirement COLA is adjusted separately by Congress. While often similar to the VA COLA increase, it’s not guaranteed to be identical, and slight variations can occur. This means that military retirees may see a slightly different increase than VA recipients, but it’s usually in the same ballpark.
Impact and Application: Where the Differences Matter
Understanding how these COLAs affect your specific situation is key:
- VA Disability Compensation: The COLA increase applies to this benefit, but the exact amount depends on your disability rating. Higher ratings generally translate to larger increases. For example, in 2025, those with a 10% disability rating can expect an increase of about $4.28 per month, while those rated at 100% without dependents will see an increase of $93.45. This means that the higher your disability rating, the more your benefits will increase to help you cover the rising cost of living. Use our VA Disability Calculator to calculate your estimated benefits.
- Military Retirement Pay: COLA increases also apply here, but different retirement plans may have varying eligibility criteria and benefit levels, influencing the overall impact. Retirees will receive a proportional increase, with a $25 increase for each $1,000 of military retirement pension they receive each month. However, those who opted for the Career Status Bonus (CSB/Redux retirement plan) will receive a smaller increase of $15 per $1,000. This means that the amount of your increase will depend on the specific retirement plan you’re enrolled in.
Taxes and Offsets: Additional Factors to Consider
- Tax Implications: VA disability compensation is tax-free, so you receive the full COLA increase. Conversely, military retirement pay is subject to federal income tax, potentially reducing the net benefit of the COLA. This means that while both benefits receive a COLA increase, the amount you get to keep may be different due to taxes.
- Offset Rules: Veterans receiving both VA disability and military retirement may encounter offset rules. These rules can limit the total amount received from both benefits to prevent double-dipping. For instance, a portion of your VA disability may be deducted from your retirement pay to balance the overall benefit. This means that you may not receive the full amount of both benefits, but rather a combined amount that is adjusted to prevent you from receiving more than you’re entitled to.
Navigating the complexities of VA COLA and military retirement COLA can feel daunting. By understanding the distinctions outlined above, you can better plan your finances and ensure you’re receiving the full benefits you deserve. Remember, staying informed is key to maximizing your benefits. Berry Law has helped over 10,000 Veterans with their disability benefits—contact us today to get the benefits you’ve earned.
