Cost of Living Allowance Questions

In discussing the BAH rate protection rules, I was asked about COLA (cost of living allowance) and whether there is any rate protection built into the COLA program.

In short, no.  COLA is designed to offset unusually high costs in certain areas.  Since housing costs are dealt with in BAH rates, it is presumed that any other unusually high expenses are variable expenses, meaning that you aren’t locked into a higher cost when the expenses declined.  For example, expenses that might be covered under COLA include transportation, clothing, and food.  COLA calculations also consider the availability of military facilities, such as commissaries, exchanges, and recreation facilities.  The costs of all these factors is calculated each year and compared to the rest of the country.  If the relative costs have dropped, then COLA will go down or be eliminated.  If the relative costs have gone up, then COLA will begin or go up.

More information about COLA can be found at the 2010 Cost-of-Living Allowance page or at the FAQ page.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.