Is a military pension inflation protected? Not if you assume every plan gets the full COLA

Is my retired pay really indexed to inflation?

Yes. Retired pay rises each year by the Social Security COLA, which the SSA bases on CPI-W. For 2026 that's 2.8%, so $3,000 × 0.028 = $84 a month, or $1,008 a year. In a flat-price year the COLA can be 0%, but your retired pay doesn't go down.

The dates run in a fixed order. The SSA announces the COLA in October, and it applies to December 1 retired pay. You see it in the January deposit, and the 1099-R with the higher gross arrives the following January.

Two exceptions matter. REDUX retirees who took the Career Status Bonus get CPI minus 1% until a one-time catch-up at 62. And your first COLA after retiring can be partial, so read the statement instead of assuming 2.8%.

Now the tax angle. The COLA is taxable retired pay, so every dollar of the raise is taxed as ordinary income. But the IRS indexes the brackets and the standard deduction too, so the raise alone rarely pushes you into a higher bracket. A civilian salary stacked on top of the pension matters far more; that's where bracket jumps actually happen. (Whether retired pay is taxable at all is its own question, covered in the article on what the 1099-R shows.)

The COLA calendar

Exceptions and the tax angle

• October: the SSA announces the new COLA percentage.
• December 1: the COLA takes effect with that month's retired pay.
• January: the first higher payment shows in your account.
• The following January: your 1099-R reports the higher gross for the year.

Which COLA beliefs don't hold up?

Several. Retired pay doesn't rise in a 0% year, REDUX retirees get CPI minus 1% until 62, and the TSP gets no automatic raise at all. Which row of the table fits you depends on your retirement system (High-3, REDUX or BRS) and whether your TSP is doing the job you assumed the pension does.

Start with your retirement system: High-3, REDUX or BRS. Then find the row in the table below that matches the assumption your current projection is built on.

The rules shifted in recent years. BRS, for people entering from 2018, kept the full COLA on a smaller 2% multiplier and ended REDUX for new members. An older estimate built on CPI minus 1% may now be too low or too high, depending on which system you're really under.

Two questions for the pay center settle it: "Which retirement system am I under?" and "Was my first COLA prorated?" An answer of "REDUX" should send you back to redo any projection built on the full COLA.

Reversibility matters here. You don't choose the COLA, and TSP fund mixes can change at any time. But an annuity bought with TSP money and most SBP elections are locked once made.

What changed with BRS

Questions for the pay center

What does Colleen's COLA statement look like next to her TSP?

Her pension adjusts itself; her TSP doesn't, so the TSP has to earn the raise. Hypothetical: Colleen, 54, a retired Coast Guard commander now earning $140K as a hospital emergency-management director, opens her retiree account statement. It shows gross retired pay of $6,000 a month and the 2.8% COLA. That's $6,000 × 0.028 = $168 a month, or $2,016 a year, all of it taxable on top of her salary.

Her $780K traditional TSP got no such notice. To hold its buying power at the same 2.8%, it would have to grow $780K × 0.028 = $21,840 in one year, before fees. Assuming 5% a year for illustration, the gain after inflation is 5% − 2.8% = 2.2%, or $17,160. That 5% is not a forecast: TSP funds can fall, and a bad year can cut into the principal itself.

Here's the tax-efficiency point. Her traditional TSP is taxed when she draws it, so its after-tax buying power is smaller than the balance shows. The pension's COLA is taxed only as it's paid, with no extra step. Moving money between accounts changes when the tax is paid; it doesn't remove it.

A rough rule: to keep a TSP draw's buying power, the account needs about the draw rate plus inflation. A 4% draw plus 2.8% inflation is about 6.8% a year, which no one can count on. That's why First Premier Bank would set Colleen's later draw rate before the Roth conversion question, which is a separate decision. One more caveat: the COLA tracks CPI-W, not her costs, so helping her mother with medical bills can outrun the raise. The site's calculator runs this kind of arithmetic with your own numbers.

Two smaller errors often show up in the same plan. Take a hypothetical REDUX retiree at 50 with 2.8% inflation each year. Assuming the full COLA, $3,000 would grow to $3,954 after 10 years. At the real 1.8% a year it reaches only $3,586, a $368 monthly shortfall. Leaving a $1,000 TSP draw flat when $1,318 would be needed by year 10 adds $318. Together: $686 a month.

The statement and the TSP

The draw-rate rule and the mistakes that pair up

Who keeps the inflation protection after I'm gone?

Nobody, unless you elected it. Retired pay stops at death, and only an SBP annuity, which is also COLA-adjusted, carries the protection to a survivor. Colleen's mother could be covered only through an insurable-interest election made at retirement. What her mother or other heirs can inherit is the TSP, through the TSP-3 beneficiary form.

Bringing your COLA questions to First Premier Bank

Talk to First Premier Bank once you know your retirement system and are about to pick a TSP draw rate or a fund mix. Have three papers on hand: the newest statement from the retired pay center, last year's 1099-R and your most recent TSP statement. With those, we can check the COLA and the TSP side by side.