Retirement Benefits

About Your COLA and Inflation

As a CalPERS retiree, you may be wondering when you’ll receive an annual cost-of-living adjustment (COLA). If you have questions about it, read on.

Retirees typically receive an annual COLA paid on the May 1 benefit payment. The law says retirees receive their first COLA in their second calendar year of retirement. That means if you retired in 2020, you will get your first COLA in May 2022. If you retired last year — 2021 — you won’t see your first COLA until May 2023.

Your COLA Percentage

COLAs are limited to a maximum of 2%, compounded annually, for all school retirees and First-Tier State of California retirees. (Second Tier State of California retirees receive a fixed 3% COLA.)

Public agencies can contract with CalPERS for maximum cost-of-living adjustments of 2%, 3%, 4%, or 5%. If you’re a public agency retiree and don’t know your COLA, contact your former employer.

Inflation and the Consumer Price Index

The law requires CalPERS to calculate annual inflation figures for COLAs by using the All Urban Consumer Price Index (CPI), U.S. City Average, 1967 Base Year. CalPERS uses the CPI at the time of retirement to calculate what your value of money should be when we adjust for COLA.

Your COLA allowance can equal but not exceed the rate of inflation using the U.S. City Average. The law also limits your annual adjustment to the rate of inflation or the COLA based on your agency’s contract with CalPERS — whichever is lower.

Calculating Your COLA

The process for calculating your cost-of-living adjustment is more complex than simply multiplying your retirement allowance by your COLA adjustment (2%, for example). In fact, a compounded percentage is applied against a figure known as your base allowance. Generally, that’s the gross amount you received at the time of your retirement.

The result is that mathematically you will get a higher adjustment over time than by simply multiplying your COLA by your gross allowance.

CalPERS determines your COLA percentage by comparing the actual rate of inflation (based on the U.S. City Average) to your 2%, 3%, 4%, or 5% adjustment. It compounds each number, then keeps a running total each year.

CalPERS makes a yearly comparison between your COLA percentage adjustment and inflation, compounding each number and applying the lesser of the two figures against a set base.

Learn More

For more information about the COLA calculation, visit our COLA webpage.

You’ll also find information about the Purchasing Power Protection Allowance (PPPA), which protects against inflation for those whose benefits fall below minimum levels established by law.

If you have further questions about your COLA, please send us a message through myCalPERS or call us at 888 CalPERS (or 888-225-7377).