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Is a Major Cost-Of-Living Adjustment Coming for Disabled Veterans and Retirees?

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Is a major cost of living adjustment or COLA on the way for military retirees and veterans who collect VA compensation for service-connected medical issues?

Many believe so due to the fact that VA COLA is tied to the Social Security Administration’s annual cost of living adjustment update. That update is determined by increases in the Consumer Price Index for Urban Wage Earners And Clerical Workers, also known as CPI-W. That data is gathered by the Bureau of Labor Statistics and calculated on a monthly basis.

CPI-W measures any increases that may apply to the cost of goods and services in the United States; it notes those increases where they occur in certain sectors in its formula for determining the next cost of living adjustment.

Those adjustments are applied to Social Security payouts and they are also applied to VA compensation rates and military retirement pay. Typically, this means retirees and veterans with VA disability pay will get more money each year as COLA changes.

In 2022, there was a COLA increase of 5.9%, and that is paid until the new COLA rates for 2023 are released, typically in December. Because of inflation and other economic factors in 2022, it’s entirely possible that veterans could see a major increase in their disability payments compared to the last adjustment.

Is a Major VA Disability Cost-of-Living Adjustment Coming in 2023?

One group called the Senior Citizens League predicts the 2023 adjustment could be more than 9.5%. Other sources project the increase could run as high as 10.5%. Why don’t we know how much the increase could be?

Because part of the methodology for the adjustment involves measuring the cost of goods and services from between the third quarter of the previous fiscal year and pulling the data from then all the way to the third quarter of the current fiscal year. The Senate has to approve the increase to veteran benefits, the law is passed, and typically the new adjusted veteran disability benefits pay is increased in December of the current year.

That effectively means that at press time the data is still being pulled and reviewed, and answers simply aren’t possible until all the math is done. If the numbers match expectations the 2023 increase could be the largest since 1981 when COLA went up by some 11%.

What Happens If There Is No Cost Of Living Adjustment?

In years where the cost of living goes up, an increase in veteran disability pay is expected. But what happens in years when there is either no increase or the cost of goods and services has actually gone down? The way the system is designed currently, there is no “negative adjustment” to COLA–you won’t have money taken away or get a lower compensation payment.

COLA increases don’t just affect those drawing VA disability pay; military retirees will also see pay increases in their military retirement paychecks. That increase could come in at more than two hundred dollars per month if projected COLA adjustments actually do take place.

What To Know About The COLA Increase

At press time, the cost-of-living adjustment for 2023 has not been announced, so while the potential increase is significant, it’s not yet official. But for financial planning purposes, it’s good to know what’s possible.

You do not have to apply in order to receive a COLA increase, and if you apply for VA compensation for service-connected injuries or medical issues in one year and are approved for that compensation in the new year, your payment rate will reflect the current amount per month with the cost of living adjustment applied.

If you are approved for VA compensation with pay that is retroactive to a certain date, be sure to ask what the current policy is for the cost of living adjustments paid in such circumstances. An error in those calculations could mean the difference of hundreds of even thousands of dollars paid to you retroactively.

Remember, you can always consider appealing a VA decision that does not work in your favor, talk to a VA rep to learn what your rights and responsibilities are to make a VA claim, follow up on a claim, or contest one if you think it’s necessary to do so.