Military retirees are set to receive another cost-of-living adjustment (COLA) in 2025. The COLA is intended to offset the rising cost of living and ensure that retirees maintain their standard of living. The amount of the 2025 COLA has not yet been determined, but it is expected to be in line with the rate of inflation.
The 2025 COLA will be the second COLA that military retirees have received since the start of the COVID-19 pandemic. In 2023, retirees received a 1.3% COLA, which was the smallest increase since 2014. However, the 2024 COLA is expected to be significantly higher, as the rate of inflation has been rising over the past year.
The COLA is an important benefit for military retirees. It helps to ensure that they can keep up with the rising cost of living and maintain their standard of living. The 2025 COLA will be a welcome addition to the retirement benefits of military veterans.
Federal Budget and Retiree Pay Adjustments
The federal budget process plays a crucial role in determining the annual adjustments to military retiree pay. The budget outlines the government’s plans for spending and revenue, and it serves as the foundation for decisions regarding retiree pay increases.
The annual adjustments to military retiree pay are based on a formula established by law. This formula considers the rate of inflation, as measured by the Consumer Price Index (CPI), and the cost-of-living adjustments to Social Security benefits.
The CPI is a measure of the average change in consumer prices for a basket of goods and services over time. When the CPI increases, it indicates that the cost of living is rising. The Social Security cost-of-living adjustments (COLAs) are based on the CPI and are designed to help Social Security recipients maintain their purchasing power.
The formula for adjusting military retiree pay is as follows:
| Year | Percentage Increase |
|---|---|
| 2022 | 5.9% |
| 2023 | 8.7% |
| 2024 | TBD |
| 2025 | TBD |
The 2022 and 2023 percentage increases were based on CPI increases and Social Security COLAs of 5.9% and 8.7%, respectively. The percentage increases for 2024 and 2025 will be determined based on the CPI and Social Security COLA increases for those years.
COLA Calculations
The COLA, or cost-of-living adjustment, is an annual adjustment to military retiree pay that is designed to keep pace with inflation. The COLA is calculated using the Consumer Price Index (CPI), which measures the average change in prices for a basket of goods and services purchased by urban wage earners and clerical workers. The COLA is applied to military retiree pay each year on 1 January.
Military Retiree Pay
Military retiree pay is based on a number of factors, including the retiree’s rank, years of service, and paygrade at the time of retirement. The basic formula for calculating military retiree pay is:
Retiree Pay = 2.5% x Years of Service x Base Pay
For example, a retired O-6 with 20 years of service would receive an annual retiree pay of $56,052 ([2.5% x 20 x $112,104] / 12). In addition to their basic pay, military retirees may also receive other benefits, such as:
- Tricare: Retiree medical and dental coverage
- VA Benefits: Healthcare, disability compensation, and educational benefits
- Military Commissaries and Exchanges: Access to military retail stores and gas stations
COLA for Military Retirees
The COLA for military retirees is the same as the COLA for Social Security recipients. COLAs are calculated based on the change in the CPI from October of one year until September of the next year. If the CPI rises by 1% over that 11-month period, retirees see a 1% pay increase the following January. If the CPI falls or remains unchanged, retirees don’t receive a COLA for the year.
Since the CPI has been rising rapidly in 2022, there is a good chance that retirees will receive a substantial COLA increase in 2023. However, it is important to note that COLAs are not guaranteed. If the CPI decreases or remains unchanged, retirees will not receive a COLA for the year.
The following table shows the COLA rates for military retirees since 2000:
| Year | COLA |
|---|---|
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
| 2019 | 2.8% |
| 2018 | 2.4% |
Legislative Proposals for Pay Increase
The Military Compensation and Retirement Modernization Commission (MCRMC)
Established by Congress in 2015, the MCRMC’s mandate was to conduct a comprehensive review of the military compensation and retirement systems and recommend reforms to improve their effectiveness and affordability. The Commission released its final report in February 2018, which included several recommendations for changes to military retiree pay. One of the key recommendations was to increase the percentage of basic pay used to calculate retiree pay from the current 50% to 55% over a five-year period, starting in 2023. The Commission also recommended increasing the annual cost-of-living adjustments (COLAs) for military retirees from the current 1% to 1.5%, effective in 2023.
The 2023 National Defense Authorization Act (NDAA)
The 2023 NDAA included a provision to increase military retiree pay by 2.7% in 2023, and an increase of 2.5% in 2024. The NDAA also included a provision to increase the annual COLAs for military retirees from 1% to 1.5%, effective in 2023. These increases were in line with the recommendations of the MCRMC.
The 2025 Pay Proposal
The Biden Administration’s proposed budget for fiscal year 2025 includes a request to increase military retiree pay by 2.7%, effective in 2025. This increase would be in addition to the 2.7% increase included in the 2023 NDAA and the 2.5% increase included in the 2024 NDAA. The proposed increase would bring the total increase in military retiree pay to 8.0% over a three-year period.
The table below summarizes the proposed increases in military retiree pay from 2023 to 2025:
| Year | Proposed Increase |
|---|---|
| 2023 | 2.7% |
| 2024 | 2.5% |
| 2025 | 2.7% |
Defense Spending and Retiree Pay
The Department of Defense (DoD) has allocated a significant portion of its budget to provide retirement benefits for military service members. This allocation is intended to ensure that those who have served their country receive financial support after they leave the military.
Retirement Pay and Inflation
Military retirement pay is subject to the same inflationary pressures that affect the general population. As the cost of living increases, the value of retirement pay can decline over time. To address this issue, the DoD periodically reviews and adjusts retirement pay rates to maintain their purchasing power.
Factors Affecting Retiree Pay
The amount of retirement pay that a service member receives depends on several factors, including:
- Time in service
- Rank at retirement
- Disability status
- Cost-of-living adjustments
Proposed 2025 Retiree Pay Raise
In accordance with the Military Retirement Modernization Act of 2016, the DoD is required to conduct a study on the adequacy of retirement pay every five years. The most recent study was released in 2020 and concluded that retirement pay rates provided adequate support for retirees living at or near the national median income level. However, the study also recommended a 2.7% increase in retirement pay rates to maintain their purchasing power.
| Year | Proposed Retirement Pay Increase |
|---|---|
| 2021 | 1.3% |
| 2022 | 2.0% |
| 2023 | 2.7% |
The proposed 2.7% increase for 2025 is subject to approval by Congress. If approved, the increase would apply to all military retirees, regardless of when they retired.
Economic Conditions and Retirement Benefits
Inflationary Pressures
The current economic climate has been marked by persistent inflation, which has eroded the purchasing power of many individuals, including military retirees. The rising cost of living has increased pressure on retirees to supplement their income or reduce their expenses.
Retirement Income Concerns
Military retiree pay is an important source of income for many retirees, but it has not kept pace with the rate of inflation in recent years. This has raised concerns among retirees about the adequacy of their retirement income and their ability to maintain their standard of living.
Legislative Proposals
In recognition of the challenges faced by military retirees, several legislative proposals have been introduced that aim to address their concerns. These proposals typically call for increases in retiree pay and enhancements to benefits.
Cost-of-Living Adjustments (COLAs)
One of the most common proposals is to increase the annual COLA for military retirees. COLAs are intended to adjust retiree pay for inflation, but they have not always been sufficient to cover the rising cost of living.
Inflation’s Impact on Retiree Purchasing Power
Inflation has eroded the purchasing power of military retirees, who rely on their monthly pension to cover living expenses. The Department of Veterans Affairs (VA) estimates that inflation has reduced the value of the average military retirement check by 30% since 2000.
Rising Costs of Healthcare
Healthcare costs have been a major driver of inflation, particularly for retirees. The cost of health insurance premiums, prescription drugs, and medical services has risen significantly in recent years, putting a strain on the budgets of military retirees.
Housing Costs
Housing costs have also been rising steadily, making it more difficult for retirees to find affordable housing. Rents and home prices have increased significantly, leaving many retirees struggling to make ends meet.
Transportation Costs
Transportation costs have also risen significantly in recent years, with the cost of gas, public transportation, and car repairs increasing. This has made it more expensive for retirees to get around.
Food Costs
Food costs have also been rising, with the cost of groceries and dining out increasing significantly. This has made it more difficult for retirees to eat healthy and affordably.
Other Expenses
In addition to these major expense categories, retirees also face other expenses, such as property taxes, utility bills, and entertainment costs. These expenses have also been rising in recent years, further eroding the purchasing power of military retirees.
| Expense Category | Inflation Rate |
|---|---|
| Healthcare | 4.5% |
| Housing | 3.2% |
| Transportation | 2.7% |
| Food | 2.3% |
| Other Expenses | 2.0% |
Comparison to Civilian Retirement Benefits
Federal employees under the Civil Service Retirement System (CSRS) receive annuity payments based on their years of service, salary, and contributions. The formula for calculating CSRS annuities is as follows:
Annuity = (1.1% x Years of Service) x (Average of Highest 3 Years of Basic Pay) x (Percentage of Contribution)
For example, a CSRS employee with 30 years of service, an average salary of $50,000, and a 5% contribution rate would receive an annuity of:
Annuity = (1.1% x 30 years) x ($50,000) x (5%) = $16,500
In comparison, military retirees receive a fixed percentage of their basic pay at the time of retirement, based on their years of service. The formula for calculating military retirement pay is as follows:
Retirement Pay = (2.5% x Years of Service) x (Basic Pay at Time of Retirement)
For example, a military retiree with 20 years of service and a final basic pay of $50,000 would receive an annual retirement pay of:
Retirement Pay = (2.5% x 20 years) x ($50,000) = $25,000
As shown in the table below, military retirees generally receive a higher percentage of their final salary in retirement than CSRS employees with the same years of service.
| Years of Service | Military Retirement Pay | CSRS Annuity |
|---|---|---|
| 20 | 50% | 33% |
| 25 | 55% | 41% |
| 30 | 60% | 49% |
Advocacy Groups and Pay Raise Support
Several advocacy groups actively support the proposed military retiree pay raise in 2025:
Military Officers Association of America (MOAA)
MOAA, with over 385,000 members, strongly advocates for the pay raise, emphasizing the rising cost of healthcare, inflation, and the diminishing value of military retirement benefits.
Military Compensation and Retirement Modernization Commission (MCRMC)
The MCRMC, an independent commission established by Congress, has recommended a 2% annual pay raise for military retirees to maintain the competitiveness of the compensation package.
American Legion
The American Legion, with over 2 million members, supports the pay raise, recognizing the sacrifices and contributions of military retirees.
National Military Family Association
The National Military Family Association advocates for the pay raise to ensure that military retirees and their families can maintain a decent standard of living.
Veterans of Foreign Wars (VFW)
The VFW, with over 1.5 million members, supports the pay raise, acknowledging the financial challenges faced by many military retirees.
National Active and Retired Federal Employees Association (NARFE)
NARFE, with over 460,000 members, supports the pay raise for military retirees, recognizing their contributions to national security.
Non Commissioned Officers Association (NCOA)
The NCOA, representing over 300,000 non-commissioned officers, advocates for the pay raise to ensure that all military retirees receive fair compensation.
Other Notable Organizations
In addition to the aforementioned advocacy groups, numerous other organizations have expressed their support for the proposed military retiree pay raise, including the following:
| Organization |
|---|
| Operation Hope |
| Military Coalition |
| Fleet Reserve Association |
| Military Order of the Purple Heart |
| Disabled American Veterans |
| Paralyzed Veterans of America |
Congressional Hearings and Budget Negotiations
Congressional hearings and budget negotiations play a crucial role in determining the fate of the military retiree pay raise for 2025. Here’s a detailed look at these processes:
Hearings
Congressional committees hold public hearings to gather input from military retirees, veterans’ organizations, and defense experts on the proposed pay raise. These hearings provide an opportunity for stakeholders to present their views and advocate for their interests.
Budget Negotiations
Once the hearings conclude, the House and Senate Appropriations Committees begin the budget negotiations process. They must agree on a compromise budget that allocates funding for various government programs, including military retirement.
Pay Raise Proposal
The military retiree pay raise for 2025 will likely be included in the proposed budget submitted by the Biden Administration. The budget proposal outlines the government’s spending priorities and provides a starting point for congressional negotiations.
Budget Resolution
Congress must pass a budget resolution, which sets spending limits for each government agency. The budget resolution provides a framework for subsequent budget negotiations and guides the allocation of funds for programs like military retirement.
Appropriations Bills
The House and Senate Armed Services Committees then draft separate appropriations bills that allocate funding for the Department of Defense. These bills specify the amount of funding available for military retiree pay.
Conference Committee
If the House and Senate versions of the appropriations bills differ, a conference committee is formed to reconcile the differences. The conference committee negotiates a compromise bill that must be approved by both chambers of Congress.
Presidential Signature
Once the appropriations bill is passed by Congress, it is sent to the President for signature. The President can sign the bill into law or veto it. If the President vetoes the bill, Congress can override the veto with a two-thirds majority vote in both chambers.
Fiscal Year
The military retiree pay raise for 2025 will take effect on October 1, 2024, the start of the fiscal year 2025.
Historical Data
The following table provides historical data on military retiree pay increases:
| Year | Percentage Increase |
|---|---|
| 2022 | 5.9% |
| 2023 | 8.7% |
| 2024 | 2.8% |
The Future of Military Retiree Pay
1. Continued Increases in Retiree Pay
Military retiree pay will likely continue to increase in the future. The annual cost-of-living adjustments (COLAs) will keep pace with inflation, ensuring that retirees maintain their purchasing power.
2. Expansion of Eligibility
The Department of Defense is considering expanding eligibility for retiree pay to include more servicemembers. This could include extending benefits to those who retire after 20 years of service and to those who were medically discharged.
3. Increased Survivor Benefits
The military is also exploring ways to increase survivor benefits for retirees. This could include increasing the amount of the death gratuity and providing more financial assistance to surviving spouses.
4. New Tax Breaks
Congress is considering several proposals to provide tax breaks to military retirees. These proposals could include reducing the tax rate on military pay and providing a tax credit for unreimbursed medical expenses.
5. Improved Healthcare Benefits
The Department of Veterans Affairs is working to improve healthcare benefits for military retirees. This includes expanding access to mental health care and providing more comprehensive coverage for long-term care.
6. Enhanced Education Opportunities
The military is also investing in enhanced education opportunities for military retirees. This includes providing more support for online learning and offering more tuition assistance for graduate degrees.
7. Increased Housing Assistance
The military is working to increase housing assistance for military retirees. This includes expanding eligibility for home loans and providing more rental assistance for low-income retirees.
8. Improved Transition Services
The military is also focused on improving transition services for military retirees. This includes providing more career counseling and job placement assistance.
9. Expanded Mental Health Services
The military is also expanding mental health services for military retirees. This includes providing more access to therapy and counseling and reducing the stigma associated with seeking help.
10. Survivor Support
Survivor Support Programs
– The Department of Defense provides a variety of survivor support programs, including counseling, financial assistance, and educational benefits.
– These programs are designed to help surviving spouses and children cope with the loss of a loved one.
– The military also offers a Survivor Benefit Plan, which provides a monthly annuity to eligible survivors.
Military Retiree Pay Raise 2025
The issue of military retiree pay raises is a contentious one, with proponents and opponents alike expressing strong views. Military retirees receive a monthly pension based on their years of service and rank at the time of retirement. However, the annual cost-of-living adjustments (COLAs) have not kept pace with inflation in recent years, and the purchasing power of military retirees’ pensions has declined as a result.
Proponents of increasing military retiree pay argue that it is a matter of fairness and justice. They point out that military retirees have dedicated their lives to serving the nation, and that they deserve to be able to maintain a decent standard of living after they retire. They also argue that the current COLAs are inadequate, and that they have not kept pace with the rising cost of living.
Opponents of increasing military retiree pay argue that it is not affordable, and that it would put a strain on the federal budget. They also argue that military retirees already receive a generous pension, and that they should not be given any more special treatment than other retirees.
The issue of military retiree pay raises is a complex one, with no easy answers. The debate is likely to continue for some time, as Congress weighs the competing interests involved.
People Also Ask
What is the current COLA for military retirees?
The current COLA for military retirees is 1.3%.
Is the COLA for military retirees automatic?
Yes, the COLA for military retirees is automatic. It is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
