With a CalPERS COLA, your income helps compensate for inflation. Yet the real advantage comes from the power of compounding growth, meaning your annual increase builds on the last, helping your pension grow over time.
Without COLA, your pension would remain a flat $3,000 a month for example, even as prices for groceries, gas, and everyday items rise. Over time, inflation can erode the purchasing power of your pension, making it seem smaller and with less purchase power.
The infographic below shows you how COLA and compounding growth work together if your COLA increased by 2% each year.
- Years 1-5: At first, the boost from COLA is small—just $247 extra a month by year five. You might not notice it much yet, but it’s quietly working behind the scenes growing.
- Years 6-10: By year 10, if the COLA is 2% every year on top of each previous 2% per year COLA, your COLA boost has grown to $585 a month.
- Years 11-15: By year 15, your COLA boost has climbed to $958 a month. That’s nearly an extra $1,000 every month added to your pension.
- Year 20: And by year 20, COLA has added a $1,370 to your monthly pension. Your original $3,000 has grown into $4,370, all thanks to the power of COLA’s compounding growth.
The COLA isn’t just a small adjustment—it’s a long-term strategy for protecting your pension.