Cost of Living Adjustments (COLAs) are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under the Final Pay and High-3 Systems, the annual COLA is equal to CPI. This is a different index than the one used for active duty annual pay raises. The index used for active duty pay raises are based upon average civilian wage increases. Thus, retirement pay COLAs and annual active duty pay raises will differ.

The COLA for those who have been retired for more than one full year will be 5.8%, effective December 1, 2008 and payable on January 2, 2009.

Under REDUX, the COLA is equal to CPI minus 1% or 4.8%.