Cost-of-Living Adjustment (COLA)
COLA is an annual cost-of-living increase that begins the second calendar year after retirement and helps your retirement benefit keep up with the rate of inflation. Eligible retirees, including survivors and beneficiaries, will receive information in April for their May 1 retirement check.
COLA is dependent on three factors:
- The Consumer Price Index for All Urban Consumers (CPI, 1967), published by the Bureau of Labor Statistics (BLS) annually
- Your employer contracted COLA percentage (e.g., 2%, 3%, 4%, or 5%)
- The year you retired
Consumer Price Index (CPI)
CPI determines the rate of inflation and is compared annually. We use the CPI at the time of retirement to calculate what your value of money should be when we adjust for COLA. CPI is determined by the BLS and, by law, it’s the official measure used by CalPERS to calculate COLA.
The 2024 annual CPI is 939.672 and the rate of inflation is 2.95%.
The CPI represents the cost of an item compared to the cost in 1967. For example, in 1967 an item cost 100.000, or $1.00. In 2024, the same item would cost $9.40.
To calculate the rate of inflation for 2024, we:
(Use the Current Year Annual CPI – Previous Year Annual CPI) / Previous Year Annual CPI = Current Year Rate of Inflation
(939.672 – 912.751)/912.751 = 2.95%
Contracted COLA Percentage
Most state and all school agencies contract for a 2% per year COLA, and public agencies can contract for a 2%, 3%, 4%, or 5% per year COLA. If the rate of inflation since retirement is higher than the employer contracted COLA percentage, by law, we must apply the lesser of the two.
Social Security Administration COLA Compared to CalPERS COLA
The Social Security Administration uses a different method for calculating COLA benefits and is payable in January versus CalPERS benefits being paid in May. Visit the Social Security Administration website for more information.
How Much Will My COLA Be?
The chart below provides the percent allowance increase a retiree will receive based on their employer contracted COLA percentage and their retirement year. There are select retirement years that also include Purchasing Power Protection Allowance (PPPA) benefits. Multiplying your current gross allowance by the chart’s COLA and PPPA (if applicable) allowance increase percent, will provide an estimate of your 2025 COLA increase.
2% Provision
| Year of Retirement | Allowance Increase (COLA and PPPA) effective May 1, 2025 |
|---|---|
| 1965-1986* | 2.95% |
| 1987-2023 | 2.00% |
| 2024 | Not eligible |
*These retirement years include PPPA adjustments
2% Provision
| Year of Retirement | Allowance Increase (COLA and PPPA) effective May 1, 2025 |
|---|---|
| 1965-1989* | 2.95% |
| 1990-2023 | 2.00% |
| 2024 | Not eligible |
* These retirement years include PPPA adjustments
3% provision
| Year of Retirement | Allowance Increase (COLA and PPPA) effective May 1, 2025 |
|---|---|
| 1965-1977* | 2.95% |
| 1978-1980 | 3.00% |
| 1981-2014 | 2.95% |
| 2015-2022 | 3.00% |
| 2023 | 2.95% |
| 2024 | Not eligible |
* These retirement years include PPPA adjustments
4% Provision
| Year of Retirement | Allowance Increase (COLA and PPPA) effective May 1, 2025 |
|---|---|
| 1965 | 2.95% |
| 1966 | 3.37% |
| 1967-1968 | 4.00% |
| 1969-2018 | 2.95% |
| 2019-2021 | 4.00% |
| 2022 | 3.06% |
| 2023 | 2.95% |
| 2024 | Not eligible |
5% Provision
| Year of Retirement | Allowance Increase (COLA and PPPA) effective May 1, 2025 |
|---|---|
| 1965-2019 | 2.95% |
| 2020 | 4.70% |
| 2021 | 5.00% |
| 2022-2023 | 2.95% |
| 2024 | Not eligible |
How Does CalPERS Determine the COLA Percentage to Pay Retirees?
We determine the COLA amount to be paid to retirees by first comparing the compounded rate of inflation to the compounded COLA percentage based on the employer contract. The actual COLA percentage you receive is the lower of the two compounded amounts. We then use your base allowance, which is the amount you received when you first retired and prior to any cost-of-living-adjustments.
When the Rate of Inflation Is Higher Than Your Employer Contracted COLA Percentage
Anytime the rate of inflation is higher than your employer contracted COLA percentage, the difference between the two is used towards eligibility for Purchasing Power Protection Allowance (PPPA).
How COLA Is Calculated
To calculate COLA, CalPERS:
- Calculates the calendar year rate of inflation, based on retirement year
- Equation: (Current Year CPI - Retirement Year CPI) / Retirement Year CPI = Rate of Inflation
- Calculate the compounded contracted COLA percentage
- (example based on 2% contracted COLA Provision)
Year 1 COLA factor is 0.0200 (or 2.00%)
Year 2: 1.0200 x 1.02 = 1.0404 – 1 = 0.0404 (or 4.04%)
Year 3: 1.0404 x 1.02 = 1.0612 – 1 = 0.0612 (or 6.12%)
Year 4: 1.0612 x 1.02 = 1.0824 – 1 = 0.0824 (or 8.24%)
Year 5: 1.0824 x 1.02 = 1.1040 – 1 = 0.1040 (or 10.40%)
- (example based on 2% contracted COLA Provision)
- Uses the lesser of the two numbers from step 1 and 2, this is your COLA factor
- Calculate COLA
- Equation: Base allowance at retirement x COLA Factor = COLA
COLA Calculation Examples
Example 1
The example will use the following data to calculate the COLA increase on May 1, 2025:
- Retirement year: 2023
- COLA Percentage: 2%
- Base allowance at retirement: $1,000.00
- 2023 CPI: 912.751 (Retirement year CPI)
- 2024 CPI: 939.672 (Current year CPI)
| Process | Calculation |
|---|---|
Step 1: Calculate the compounded rate of inflation based on retirement year | Calculate the compounded rate of inflation by subtracting the current year CPI by the retirement year CPI and dividing by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.
The 2024 calendar year rate of inflation is 2.95%. |
Step 2: Calculate the compounded COLA percentage | Year 1 COLA factor is 0.0200 (or 2.00%) |
Step 3: Determining COLA factor | Use the lesser of the two numbers from steps 1 and 2, and this determines your COLA factor. Rate of Inflation 2.95% > Compounded COLA Percentage 2.00% 2024 calendar year COLA factor will be 2.00%. |
Step 4: Calculate the COLA amount payable | Calculate the COLA amount by multiplying the 2024 calendar year COLA factor to the base allowance.
The 2024 calendar year payable COLA amount is $20.00.
The new allowance is $1,020.00. |
Example 2
The example will use the following data to calculate the COLA increase on May 1, 2025:
- Retirement year: 2018
- COLA Percentage: 2%
- Base allowance at retirement: $1,000.00
- 2018 CPI: 752.205 (retirement year CPI)
- 2024 CPI: 939.672 (current year CPI)
| Process | Calculation |
|---|---|
Step 1: Calculate the compounded rate of inflation based on retirement year | Calculate the compounded rate of inflation by subtracting the current year CPI by the retirement year CPI and dividing by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.
The 2024 calendar year rate of inflation is 24.92%. |
Step 2: Calculate the compounded COLA percentage | Year 1 COLA factor is 0.0200 (or 2.00%) Year 2: 1.0200 x 1.02 = 1.0404 – 1 = 0.0404 (or 4.04%) Year 3: 1.0404 x 1.02 = 1.0612 – 1 = 0.0612 (or 6.12%) Year 4: 1.0612 x 1.02 = 1.0824 – 1 = 0.0824 (or 8.24%) Year 5: 1.0824 x 1.02 = 1.1040 – 1 = 0.1040 (or 10.40%) Year 6: 1.1040 x 1.02 = 1.1262 – 1 = 0.1262 (or 12.62%) |
Step 3: Determining COLA factor | Use the lesser of the two numbers from steps 1 and 2 and this determines your COLA factor. Rate of Inflation 24.92% > Compounded COLA Percentage 12.62% 2024 calendar year COLA factor will be 12.62%. |
Step 4: Calculate the COLA amount payable | Calculate the COLA amount by multiplying the 2024 COLA factor to the base allowance.
The 2024 calendar year payable COLA amount is $126.20.
The new allowance is $1,126.20. |
Example 1
The example will use the following data to calculate the COLA increase on May 1, 2025:
- Retirement year: 2019
- COLA Percentage: 3%
- Base allowance at retirement: $1,000.00
- 2019 CPI: 765.836 (Retirement year CPI)
- 2024 CPI: 939.672 (Current year CPI)
| Process | Calculation |
|---|---|
Step 1: Calculate the compounded rate of inflation based on retirement year | Calculate the compounded rate of inflation by subtracting the current year CPI by the retirement year CPI and dividing by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.
The 2024 calendar year rate of inflation is 22.70%. |
Step 2: Calculate the compounded COLA percentage | Year 1 COLA factor is 0.0300 (or 3.00%) Year 2: 1.0300 x 1.03 = 1.0609 – 1 = 0.0609 (or 6.09%) Year 3: 1.0609 x 1.03 = 1.0927 – 1 = 0.0927 (or 9.27%) Year 4: 1.0927 x 1.03 = 1.1255 – 1 = 0.1255 (or 12.55%) Year 5: 1.1255 x 1.03 = 1.1593 – 1 = 0.1593 (or 15.93%) |
Step 3: Determining COLA factor | Use the lesser of the two numbers from steps 1 and 2 and this determines your COLA factor. Rate of Inflation 22.70% > Compounded COLA Percentage 15.93% 2024 calendar year COLA factor will be 15.93%. |
Step 4: Calculate the COLA amount payable | Calculate the COLA amount by multiplying the 2024 calendar year COLA factor to the base allowance.
The 2024 calendar year payable COLA amount is $159.30.
The new allowance is $1,159.30. |
Example 2
The example will use the following data to calculate the COLA increase on May 1, 2025:
- Retirement year: 2016
- COLA Percentage: 4%
- Base allowance at retirement: $1,000.00
- 2016 CPI: 718.955 (retirement year CPI)
- 2024 CPI: 939.672 (current year CPI)
| Process | Calculation |
|---|---|
Step 1: Calculate the compounded rate of inflation based on retirement year | Calculate the compounded rate of inflation by subtracting the current year CPI by the retirement year CPI and dividing by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.
The 2024 calendar year rate of inflation is 30.70%. |
Step 2: Calculate the compounded COLA percentage | Year 1 COLA factor is 0.0400 (or 4.00%) Year 2: 1.0400 x 1.04 = 1.0816 – 1 = 0.0816 (or 8.16%) Year 3: 1.0816 x 1.04 = 1.1249 – 1 = 0.1249 (or 12.49%) Year 4: 1.1249 x 1.04 = 1.1699 – 1 = 0.1699 (or 16.99%) Year 5: 1.1699 x 1.04 = 1.2167 – 1 = 0.2167 (or 21.67%) Year 6: 1.2167 x 1.04 = 1.2653 – 1 = 0.2653 (or 26.53%) Year 7: 1.2653 x 1.04 = 1.3159 – 1 = 0.3159 (or 31.59%) Year 8: 1.3159 x 1.04 = 1.3686 - 1 = 0.3686 (or 36.86%) |
Step 3: Determining COLA factor | Use the lesser of the two numbers from steps 1 and 2 and this determines your COLA factor. Rate of Inflation 30.70% < Compounded COLA Percentage 36.86% 2024 calendar year COLA factor will be 30.70%. |
Step 4: Calculate the COLA amount payable | Calculate the COLA amount multiplying the 2024 COLA factor to the base allowance.
The 2024 calendar year payable COLA amount is $307.00.
The new allowance is $1,307.00. |
Example 3
The example will use the following data to calculate the COLA increase on May 1, 2025:
- Retirement year: 2020
- COLA Percentage: 5%
- Base allowance at retirement: $1,000.00
- 2020 CPI: 775.284 (Retirement year CPI)
- 2024 CPI: 939.672 (Current year CPI)
| Process | Calculation |
|---|---|
Step 1: Calculate the compounded rate of inflation based on retirement year | Calculate the compounded rate of inflation by subtracting the current year CPI by the retirement year CPI and dividing by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.
The 2024 calendar year rate of inflation is 21.20%. |
Step 2: Calculate the compounded COLA percentage | Year 1 COLA factor is 0.0500 (or 5.00%) Year 2: 1.0500 x 1.05 = 1.1025 – 1 = 0.1025 (or 10.25%) Year 3: 1.1025 x 1.05 = 1.1576 – 1 = 0.1576 (or 15.76%) Year 4: 1.1576 x 1.05 = 1.2155 – 1 = 0.2155 (or 21.55%) |
Step 3: Determining COLA factor | Use the lesser of the two numbers from steps 1 and 2 and this determines your COLA factor. Rate of Inflation 21.20% < Compounded COLA Percentage 21.55% 2024 calendar year COLA factor will be 21.20%. |
Step 4: Calculate the COLA amount payable | Calculate the COLA amount by multiplying the 2024 calendar year COLA factor to the base allowance.
The 2024 calendar year payable COLA amount is $212.00.
The new allowance is $1,212.00. |
If you have any questions, contact us at 888 CalPERS (or 888-225-7377).
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