How it works
A cost-of-living adjustment raises your pension a set percentage every year. Over decades the compounding is large — this shows the total extra a COLA delivers and what your final-year check would be.
Who this is for
Anyone whose pension includes an annual raise and wants to see what that clause is actually worth over a full retirement, not just this year.
Worked example
Starting from an $1,800 monthly pension with a 2% annual COLA over 25 years, the total collected comes out to roughly $691,800 versus $540,000 with no COLA at all — about $151,800 extra, purely from a 2% yearly raise. By the final year, that same pension check has grown to nearly $2,900 a month, well above where it started.
Frequently asked questions
Is 2% a typical COLA? It varies widely by plan — some private pensions have none, government and military pensions often tie theirs to inflation, sometimes with a cap.
Does this account for inflation eating into the raise? No — this shows the nominal extra dollars a COLA adds; see the inflation-adjusted calculator for how inflation affects real buying power.
Why does a COLA matter so much for the lump-sum decision? A rising pension is worth more than a flat one of the same starting size — see how much COLA raises really add for the full picture before comparing to a buyout.