Key 2026 REDUX COLA facts
- CSB/REDUX retirees get a smaller COLA because the plan indexes at CPI minus one percentage point when inflation is above 1%.
- The adjustment is automatic, showing up in the end-of-month retired pay deposit without submitting forms or requests to DFAS.
- A one-point COLA gap seems small, but it compounds and can widen the difference each year in retirement.
- At age 62, the plan recalculates pay to High-3 levels, then reduced COLAs continue afterward for the long haul.
How to sanity-check your new payment
- Use your current gross retired pay and multiply by 1.018 to estimate the new REDUX gross amount quickly.
- Compare the estimate to your updated Retiree Account Statement and watch for taxes, SBP premiums, and allotments changing.
- If the deposit differs materially, confirm whether a partial COLA applies based on your retirement date and plan.
Top questions about 2026 REDUX COLA
Will the 1% COLA reduction for REDUX retirees change?
Under current rules, REDUX COLA stays one percentage point below the standard COLA whenever inflation produces a COLA above 1%. That policy is built into the retirement plan’s indexing method, so it won’t change automatically. Any change would require a formal policy or legislative update, plus implementing guidance.
What are the implications of the REDUX plan’s reduced COLA for long-term financial planning?
Reduced COLAs lower your payment growth rate, so purchasing power can drift downward faster than expected. Build your budget using conservative COLA assumptions and maintain a buffer for housing, health care, and taxes. The age-62 recomputation helps temporarily, but the reduced COLA resumes after that point.
How does the COLA affect VA disability compensation?
VA disability compensation typically receives the same percentage COLA as Social Security, which updates the rate tables automatically. If you receive both VA compensation and Military retired pay, your net deposit may change in different directions due to offsets, concurrent receipt rules, or withholding. Always verify both payment statements after the adjustment.
Key Takeaways
- REDUX retirees receive COLA at CPI minus one percent when inflation exceeds 1% annually.
- In 2026, standard retired pay COLA is 2.8%, while REDUX is 1.8% for most retirees.
- The 1% gap compounds, widening lifetime income unless you plan for it early carefully.
- At age 62, CSB/REDUX pay is recomputed, then the reduced COLA resumes for life.
- Estimate your increase by multiplying your gross retired pay by 1.018, not 1.028 this December.
- COLA also updates VA disability rates automatically, but dependent and tax factors can change net pay.
What is the 2026 COLA for CSB/REDUX Military retirees?
CSB/REDUX Military retirees receive a 1.8% COLA for 2026, versus 2.8% for most other Military retirees.
The COLA is effective December 1 and shows in the end-of-month retired pay deposit; SBP annuitants see it in early January.
DFAS posts the official notice and timing on its Retired Military & Annuitants page.
Plan on the smaller percentage if you remain under REDUX indexing.
- The COLA is applied to your gross retired pay automatically, so you do not file paperwork just to receive the annual increase.
- Your net deposit may not rise by exactly 1.8% because federal withholding, SBP premiums, allotments, and insurance deductions are recalculated afterward.
- If you receive other entitlements, use the Retiree Account Statement as the baseline, not a bank deposit that might include offsets or adjustments.
- For quick planning, treat the increase as a multiplier: new gross equals old gross times 1.018, before deductions and taxes.
| Example gross retired pay | Standard COLA (2.8%) new gross | REDUX COLA (1.8%) new gross | Monthly difference |
|---|---|---|---|
| $1,000 | $1,028 | $1,018 | $10 |
| $2,500 | $2,570 | $2,545 | $25 |
| $5,000 | $5,140 | $5,090 | $50 |
- Pull your current gross retired pay from the most recent Retiree Account Statement, focusing on the gross line before deductions and offsets.
- Multiply that gross amount by 1.018 to estimate the REDUX-adjusted gross, then compare it against the updated amount when DFAS posts it.
- Reconcile the difference between the new gross and your bank deposit by checking taxes, SBP premiums, allotments, and any other deductions that changed.
Maintain situational awareness on timing: the COLA is effective December 1, so the first higher amount normally appears at the end of December for retired pay.
If your deposit does not reflect the expected change, compare the December and January statements line-by-line before escalating through customer support.
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Why is REDUX COLA reduced by 1%, and when can it match the standard COLA?
REDUX COLA is reduced by one percentage point when the standard COLA exceeds 1%.
When the standard COLA is 1% or less, REDUX uses the same rate as other retirement plans.
The DoD explains the formula, the reduction trigger, and first-year partial COLA rules on its Retirement Cost of Living Adjustments page.
- In low-inflation periods, the standard COLA can be 1% or less, and REDUX will not take the one-point reduction that year.
- When inflation is higher, REDUX takes the reduction every year, so the gap can widen even if your starting retired pay is similar.
- The first COLA after retirement may be partial instead of full, especially if you retire during the year before the next December adjustment.
- For REDUX participants, the first partial COLA is based on the High-36 method, then further prorated to avoid a double boost in the first year.
- Confirm whether you elected CSB/REDUX at the 15-year point; that election is what triggers the reduced COLA indexing rules later.
- Check your retirement effective date and first full calendar year on retired pay, because first-year COLA calculations can differ from standard annual adjustments.
- Use your Retiree Account Statement history to validate the percentage applied, and document anomalies before you contact DFAS or your service agency.
For planning, assume the REDUX reduction continues unless policy changes; build models that handle both full and reduced COLA years.
The mission is predictability: if you can explain your expected gross change using the rules above, you can spot errors quickly and avoid missed deductions.
How much does a 1% lower COLA cost over time?
A 1% lower COLA compounds, so the dollar gap tends to grow each year even if the initial difference looks small.
Because COLA tracks inflation, the gap is larger in high-inflation periods and smaller when COLA is near 1%.
The Social Security Administration’s COLA history provides a clean trend line you can use for long-term comparisons.
| Payment year | COLA effective year (December benefits year) | Standard COLA | REDUX COLA |
|---|---|---|---|
| 2023 | 2022 | 8.7% | 7.7% |
| 2026 | 2023 | 3.2% | 2.2% |
| 2026 | 2026 | 2.5% | 1.5% |
| 2026 | 2026 | 2.8% | 1.8% |
- Compounding is the critical path: the percent difference applies to an ever-growing base, so later gaps are larger than early gaps.
- If inflation spikes, both plans rise, but REDUX still lags by one point, which can be noticeable on larger gross retired pay amounts.
- If inflation is very low and COLA is at or under 1%, the REDUX reduction may not apply, temporarily narrowing the gap.
- Treat your plan assumptions as ranges, not a single number, and include at least one high-inflation scenario in your retirement model.
- Start with your current gross retired pay, then run two projections using identical COLA assumptions, one at full COLA and one at COLA minus one point.
- Add an age-62 checkpoint if you are under REDUX, because the recomputation can temporarily reset the base before reduced indexing resumes.
- Compare results against your expected expense curve, and prioritize savings targets that protect housing, health care, and emergency reserves first.
Even when the annual difference is only one point, the effect is persistent.
If you maintain a long retirement horizon, small percentage differences can translate into substantial cumulative dollars.
The cleanest control is a periodic after-action review: update your projection annually with the new COLA and re-balance your budget and savings.
What happens at age 62 under CSB/REDUX?
At age 62, CSB/REDUX retired pay is recomputed to the amount it would have been under High-3.
That one-time recomputation applies full cumulative COLAs up to that point, but future annual COLAs return to the reduced REDUX rate.
DFAS summarizes the age-62 restoration and continued reduced COLA behavior on its Career Status Bonus (CSB)/REDUX page.
This checkpoint is worth building into your long-range plan.
- The age-62 adjustment can increase your gross retired pay noticeably, especially if inflation has been high during your retirement years.
- Do not treat the age-62 recomputation as a permanent fix, because the reduced COLA indexing resumes after the catch-up year.
- If you have SBP coverage, allotments, or insurance premiums, expect those deductions to continue and potentially scale with the new gross amount.
- Keep documentation of your pre-62 and post-62 Retiree Account Statements so you can prove continuity if discrepancies appear in questions later.
- About a year before turning 62, build a simple projection that assumes a one-time catch-up, then reduced COLAs afterward again.
- When you receive the recalculated Retiree Account Statement, compare the gross line and deductions to the prior month to confirm each change.
- If the recalculation creates a meaningful tax impact, revisit withholding and estimated tax planning so your net cash flow stays stable.
Operationally, age 62 is a documentation event as much as a pay event.
Treat it like an audit: save statements, note the percentage changes, and update your budget baseline.
Then continue annual reviews, because the reduced COLA resumes and the gap can begin widening again.
How should REDUX retirees plan for taxes and cash flow after a COLA?
Your gross COLA increase does not guarantee the same percentage increase in your bank deposit.
Military retired pay based on age or length of service is taxable as pension income, so withholding and net pay can shift.
The IRS explains these basics and withholding options in its Federal Income Tax Withholding After Leaving the Military guide.
- If you adjust withholding, do it deliberately and document the change, because the goal is avoiding an unexpected tax bill.
- Review allotments, insurance premiums, and SBP costs at the same time, since small increases can trigger automatic recalculations or new minimums.
- If you have other household income, the COLA may push you into a different marginal bracket or affect estimated tax needs.
- Use net pay, not gross pay, as your operational baseline for monthly budgeting, debt payments, and emergency fund targets going forward.
- Identify your new gross amount, then subtract fixed deductions such as SBP, allotments, and insurance to estimate your new take-home pay.
- Compare the estimate to your actual deposit after the COLA posts, and record the variance so you can spot future anomalies faster.
- If the variance is driven by taxes, adjust withholding or set aside monthly estimated payments to maintain 100% accountability for year-end obligations.
A COLA is predictable, but tax outcomes are situational.
The safest approach is to treat December and January as a checkpoint month, capture your new net, and validate withholding.
Once you lock the baseline, you can scale contributions and discretionary spending without guessing.
How does COLA affect VA disability compensation?
VA disability compensation rates receive automatic COLA increases that track the Social Security COLA percentage.
The VA publishes rate guidance and explains how COLA works on its current disability compensation rates page.
If you receive both VA compensation and Military retired pay, your net deposit can change due to offsets or concurrent receipt rules.
- VA compensation uses rate tables that vary with disability rating and dependents, so the same COLA percentage produces different dollar increases.
- The effective date on VA rate tables is important for budgeting, because VA payments are issued on a schedule that can shift around holidays.
- If you have concurrent receipt through CRDP or receive CRSC, the interaction can affect what portion of your income is taxable versus non-taxable.
- Treat VA and DFAS as separate systems: verify each payment source independently, then reconcile them in your household budget spreadsheet.
- Confirm your VA rating, dependent status, and current monthly rate, then identify the new rate after the COLA update using the published table.
- Check your Military retired pay statement for any VA waiver line, CRDP, or CRSC entries so you understand why the net deposit may differ.
- If your combined income changed materially, update your annual plan for taxes, savings, and benefits eligibility to avoid surprise reversals.
The practical takeaway is separation of concerns.
COLA moves both VA and Military systems, but their rules are different, and timing can differ.
Verify VA rates and DFAS statements independently, then reconcile in your budget.
That discipline prevents misreads and keeps your plan aligned.
The bottom line
The 2026 COLA environment is straightforward: most Military retirees receive a 2.8% increase, while CSB/REDUX retirees receive 1.8% because REDUX indexing runs one point behind when COLA exceeds 1%.
That difference is small in any single year, but it compounds and can become a material planning factor over a full retirement horizon.
Your best defense is disciplined verification: estimate your new gross with a simple multiplier, then reconcile it against your Retiree Account Statement and actual deposit.
Keep taxes, SBP premiums, allotments, and VA interactions in view, because they shape net pay more than the COLA headline.
Finally, build an age-62 checkpoint into your plan, since REDUX pay is recomputed then and the reduced COLA resumes afterward.
If something looks off, document the variance and escalate with supporting statements.
References Used
Frequently Asked Questions
When does a COLA show up in Military retired pay deposits?
Military retired pay COLAs are effective December 1 and typically appear in the end-of-month payment for retirees. Timing can shift for weekends or holidays, so verify the Retiree Account Statement rather than relying only on a bank deposit.
How can I confirm I am under CSB/REDUX?
If you accepted the Career Status Bonus around your 15-year point and elected the reduced retirement multiplier, you are generally under CSB/REDUX. Your retirement paperwork and Retiree Account Statement usually identify the plan used to compute your pay.
Does REDUX always subtract 1% from the COLA?
No. REDUX matches the standard COLA when the COLA is 1% or less. When the standard COLA exceeds 1%, REDUX receives one percentage point less, which is why higher inflation years create larger gaps.
Why might the first COLA after retirement be smaller?
Some new retirees get a partial COLA because they were not on retired pay for the full measurement period. The partial factor depends on your retirement date and plan, so the first adjustment can be smaller than later annual COLAs.
Does COLA apply to Survivor Benefit Plan annuities?
Yes. SBP annuities generally receive the same COLA as most retired pay, but the deposit timing may differ from retirees. Treat SBP as its own pay stream and verify the annuity statement after the COLA posts.
Can COLA change my SBP premium amount?
Not directly, but the premium is calculated as a percentage of your covered base amount. When COLA increases gross retired pay, the dollar premium may change accordingly, even though the percentage election stays the same.
What is the fastest way to estimate my new gross retired pay?
For a quick estimate, multiply your current gross retired pay by 1.018 for REDUX, or by 1.028 for standard plans. Then subtract your usual deductions. This gives a planning number before DFAS posts the updated statement.
Do dependents change the COLA percentage on VA compensation?
The COLA percentage is the same regardless of dependents, but your total monthly payment can change if your dependency status changes. Dependency updates affect the base rate line item, and the COLA is applied to that new base.
What documents should I keep to verify a COLA change?
Keep your Retiree Account Statements for at least the last two years, plus the month the COLA takes effect. Capture the gross pay line, deductions, and net deposit. That record set supports faster resolution if you report an error.
Can a retiree change from REDUX to High-3 after retirement?
In most cases, retirees cannot switch retirement systems after retiring. CSB/REDUX elections were made during service, and the plan rules continue in retirement. If you are unsure, confirm your plan on official retirement documents or pay statements.
