In May the inflation number on the news hit 4.2%. If you draw retired pay, it's natural to figure your January raise will land somewhere near that. It won't. The 2027 COLA is tracking 3.4% to 3.5%, and that gap isn't a trick or a cut. It comes from how the law says the COLA gets measured, which differs from the headline in three specific ways.
Once you see those three, you can read any inflation report and know within a tenth of a point what it means for your check. Every figure below comes from the Bureau of Labor Statistics releases, the Social Security Administration's own COLA notices in the Federal Register, or DoD's published COLA table. I reran SSA's math on every COLA quoted here and each one reproduces.
The short version
Different index. The news reports CPI-U. Your COLA uses CPI-W, a narrower index built around wage earners.
Different months. The headline compares one month to the same month a year earlier. The COLA compares the July to September average against the July to September average from the last year a COLA was paid. A spike in May only counts if prices are still that high in the summer.
Rounded. The result goes to the nearest tenth of a percent, effective December 1.
It cuts both ways. In three of the last five years the COLA came in above the September headline, not below it.
The Three Differences Between the Headline and Your COLA
1. It's a different price index
When a news story says "inflation was 3.4%," it means the Consumer Price Index for All Urban Consumers, CPI-U. Your COLA runs on the Consumer Price Index for Urban Wage Earners and Clerical Workers, CPI-W. It's a subset of CPI-U built from households where more than half the income comes from clerical or hourly work and at least one earner worked 37 weeks or more in the past year. BLS puts that group at about 30% of the population.
The Defense Department's own COLA table says it plainly. Military retired pay adjustments are "based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) through the third quarter." That's the same index Social Security uses, which is why the military COLA and the Social Security COLA come out identical.
The two indexes usually land close together. In August 2026, CPI-U was up 3.4% over the year and CPI-W was up 3.5%. So the index accounts for a tenth here or there. The bigger difference is timing.
2. It only looks at July, August and September
The headline is a moving 12-month comparison that gets reported every month. The COLA ignores eleven of those reports. It takes the average of the July, August and September CPI-W and compares it to the same three-month average from the last year a COLA was paid.
That's why May didn't matter. The headline went from 2.4% in February to 4.2% in May, then fell to 3.5% in June as prices actually dropped that month. By July and August it sat at 3.4%. The COLA never sees the peak. What it sees is how high prices still are during the summer quarter.
Be careful with this part, because it's easy to get backwards. The spring price increases aren't thrown out. The COLA compares price levels, so whatever prices rose last fall and this spring and stayed up is fully counted. What drops out is any rise that reversed before July. June 2026 was one of those months, with the all-items index falling 0.3% before seasonal adjustment.
3. It's an average, and then it's rounded
Here is the part that surprises people most. July 2026 CPI-W was 3.4% above July 2025. That's the number BLS reported. But it was only 3.1% above the number the COLA is actually measured against, because the baseline isn't July 2025. It's the average of July, August and September 2025, and prices rose through that quarter.
The baseline for 2027 is 317.265, straight from SSA's notice announcing the 2026 COLA. July and August 2026 came in at 327.104 and 328.481. If September comes in exactly flat with August, the 2026 average is 328.022, which is 3.39% above the baseline. That rounds to 3.4%.
How the COLA Is Calculated, Step by Step
This is the whole formula. Social Security's version is in section 215(i) of the Social Security Act, and the military version is in 10 U.S.C. 1401a(b), which says the increase takes effect December 1 and is "adjusted to the nearest one-tenth of 1 percent."
- Take CPI-W for July, August and September. These are the unadjusted index levels BLS publishes, not the percentages.
- Average the three months. SSA rounds the average to three decimal places.
- Find the baseline. It's the same three-month average from the last year a COLA was actually paid. Usually that's last year.
- Compute the percent increase from the baseline to this year's average.
- Round to the nearest tenth of a percent. That's the COLA.
- Apply it December 1. It shows up in the payment made at the start of January. This year January 1 is a federal holiday, so the first check at the new rate lands December 31, 2026.
One detail on your actual check. The law rounds military retired pay down to the next lower whole dollar after the increase, so a raise that works out to $97.92 on paper can show up as $97 on your statement.
Checked against SSA's own numbers
Below is every COLA from the last five years, run through those steps using the exact index values SSA printed in its Federal Register notices. Each one reproduces the published COLA.
| COLA paid from January | Baseline average | New average | Exact increase | COLA |
|---|---|---|---|---|
| 2022 | 253.412 | 268.421 | 5.923% | 5.9% |
| 2023 | 268.421 | 291.901 | 8.748% | 8.7% |
| 2024 | 291.901 | 301.236 | 3.198% | 3.2% |
| 2025 | 301.236 | 308.729 | 2.487% | 2.5% |
| 2026 | 308.729 | 317.265 | 2.765% | 2.8% |
| 2027 | 317.265 | September pending | 3.391% if flat | Oct 14 |
Look twice at the 2023 row. The exact increase was 8.7475%, a hair under the 8.75% it would have taken to round up to 8.8%. That's how close a tenth of a point can come down to.
Now put a dollar sign on it
A tenth of a point on a $2,880 pension is about $2.88 a month. On your pension, with your VA rating and your state's tax, it's a different number. The calculator gives you yours in about a minute. Free, no account, nothing saved.
Calculate my retirement pay →The Headline Has Missed in Both Directions
If the COLA always came in below the headline, you could just knock a few tenths off and be done. It doesn't. Here's the September CPI-U headline, released the same morning as each COLA announcement, next to the COLA that actually followed.
The 2024 COLA is the cleanest example of the averaging effect. In September 2023, CPI-W was up 3.6% over the year. The COLA came in at 3.2%. The reason was July 2023, which was only 2.6% above July 2022 and dragged the quarter's average down. One hot month at the end of the quarter can't carry the whole average.
The 2023 COLA went the other way. The September 2022 headline was 8.2% and the COLA was 8.7%, because CPI-W had been running hotter than CPI-U. And if you were watching the news that June, you saw a 9.1% headline, the peak of that cycle, which the COLA never reached.
What Happens When Prices Fall
The COLA can't go negative, and your retired pay can't be cut by it. If the third-quarter average doesn't rise above the baseline, there's simply no COLA that year. That happened for the COLAs that would have been paid in January 2010, 2011 and 2016.
The baseline doesn't reset in a zero year either. It stays pinned to the last year a COLA was paid. For military retirees, 10 U.S.C. 1401a defines the base index as the price index "for the most recent adjustment," and SSA follows the same rule. Two real examples from SSA's notices:
- The 2012 COLA of 3.6% was measured from the third quarter of 2008 to the third quarter of 2011, skipping the two zero years in between.
- The 2017 COLA of 0.3% was measured from the third quarter of 2014 to the third quarter of 2016, because 2016's COLA was zero.
In plain terms, a flat year doesn't cost you the inflation. It gets counted the next time prices rise above the old high point.
What This Means for the 2027 COLA
Two of the three months are in. September CPI-W prints Wednesday, October 14, 2026, at 8:30 a.m. Eastern, and SSA normally announces the COLA the same morning. From the numbers already published, here's where September has to land.
| September CPI-W compared with August | 2027 COLA |
|---|---|
| Falls more than about 0.12% | 3.3% or lower |
| Anywhere from about 0.12% down to 0.17% up | 3.4% |
| Rises about 0.17% to 0.46% | 3.5% |
| Rises more than about 0.46% | 3.6% or higher |
For a sense of what's normal, September CPI-W rose 0.23% over August in 2023, 0.13% in 2024 and 0.26% in 2025. Repeat 2023 or 2025 and the COLA is 3.5%. Repeat 2024 and it's 3.4%.
In dollars, take a $2,880 monthly pension, about what an E-7 draws after 20 years under High-3. At 3.4% it becomes $2,977 after DFAS rounds down to the dollar. At 3.5% it's $2,980. At May's 4.2% headline it would have been $3,000. That's the $20 to $23 a month the headline would have promised and the formula won't deliver.
The full forecast, including what each outcome does to pay across ranks, is in our 2027 COLA forecast, and the VA side is in the 2027 VA disability rate projections. Both get the official number on October 14.
Who Gets Less Than the Full COLA
Most retirees get the whole percentage. Two groups get less, and one group people often worry about doesn't.
- REDUX retirees, meaning anyone who took the Career Status Bonus, get the COLA minus one percentage point. For 2026 that was 1.8% instead of 2.8%. For 2027 it would be 2.4% or 2.5%.
- First-year retirees get a prorated COLA based on the quarter they retired in. DoD's 2026 table gave 2.6% to High-3 and BRS members who retired January through March 2025, 1.6% for April through June, 0.7% for July through September and nothing for October through December. Our COLA trap guide walks through why retirement timing matters.
- BRS retirees get the full COLA. The REDUX reduction doesn't apply to the Blended Retirement System, which 10 U.S.C. 1401a(b)(5) spells out.
SBP annuities rise by the same percentage the retiree's pay would have. VA disability compensation normally rises by the same percentage too, set each year by an act of Congress that ties it to the Social Security COLA.
Why CPI-W and Not Something Else
People ask this every October, usually because CPI-W can miss costs that weigh heavily on older households. SSA's answer, printed in every COLA notice, is history. When automatic COLAs started in 1975, "only one CPI existed, namely the index now referred to as CPI for Urban Wage Earners and Clerical Workers." BLS built other indexes later, and SSA's notice says "we follow precedent by continuing to use the CPI-W."
Changing that would take an act of Congress. Until one passes, CPI-W in July, August and September is the whole ballgame.
Where these numbers come from
Index values and COLAs are from SSA's "Cost-of-Living Increase and Other Determinations" notices in the Federal Register for 2011, 2016, and 2021 through 2025, read from the published text. Every COLA in this article was recomputed from SSA's own index values and matched.
Headline figures and the July and August 2026 CPI-W are from the BLS CPI releases for July and August 2026 (USDL-26-1496), and for September 2022 and 2023.
Military rules are from 10 U.S.C. 1401a and DoD's 2026 retired pay COLA table as reprinted by the Labor Department in UIPL 03-26.
The Bottom Line
The inflation headline is a monthly weather report. Your COLA is one reading taken over three summer months, with a different thermometer, rounded to a tenth. They'll usually be close, and they'll rarely match.
If you want to predict your COLA, ignore the spring headlines and watch the July, August and September CPI-W index levels against last year's third-quarter average. For 2027 that's 317.265, and two of the three months already put the answer at 3.4% or 3.5%. October 14 settles it.
Frequently Asked Questions
How is the military retirement COLA calculated?
Average the CPI-W for July, August and September, compare it to the same average from the last year a COLA was paid, and round the percent increase to the nearest tenth. It takes effect December 1 and is first paid in the payment at the start of January. The military COLA uses the same index and the same method as Social Security, so the two match.
Why is my COLA lower than the inflation rate on the news?
The news reports CPI-U for a single month against the same month a year earlier. The COLA uses CPI-W and compares three-month averages, so a spike that fades before July never shows up. It isn't always lower, though. The 2022 and 2023 COLAs both came in half a point above the September headline.
When will the 2027 COLA be announced?
BLS publishes September 2026 CPI on Wednesday, October 14, 2026, at 8:30 a.m. Eastern, and SSA normally announces the COLA the same day. It takes effect December 1, 2026, and the first payment at the new rate arrives December 31, 2026, because January 1 is a holiday.
Can the COLA be negative?
No. If the third-quarter average doesn't rise, there is no COLA that year and retired pay stays the same. The baseline also stays put until a COLA is paid again, so the inflation is counted later rather than lost. That happened for the 2010, 2011 and 2016 COLAs.
Do all military retirees get the full COLA?
No. REDUX retirees who took the Career Status Bonus get the COLA minus one percentage point, and new retirees get a prorated COLA in their first year based on the quarter they retired. High-3 and BRS retirees past their first year get the full amount.