Beginning Oct. 1, American service members and their families living overseas began seeing a reduction in their Cost of Living Allowance.
The extent of the reduction depends on the member’s rank, years of service, number of dependents and duty location.
For example, for service members stationed at Ramstein, the payment for an O-4 with three dependents will decrease approximately $54 monthly and for an E-6 with three dependents, about $10 per month.
The purpose of overseas COLA is to ensure service members have the same purchasing power at overseas duty locations as in the U.S. It is not a fixed amount and can fluctuate from pay period to pay period.
Because of the fluctuation, Defense Department officials continually stress that fixed expenses such as rent and car payments should be based on what a service member can afford without COLA.
According to the most recent Bureau of Labor Statistics Consumer Expenditure Survey for military members, the typical member bought less expensive goods and services, such as a used instead of new car, and spent more disposable income on non-COLA items, which left less money to purchase COLA type goods and services. This assessment led to COLA rates being adjusted downward.
To maintain purchasing power, the Per Diem Committee in Washington, D.C., adjusts the COLA baseline annually depending on where service members shop and the prices of goods and services they buy as determined by annual Overseas Housing Allowance surveys.
COLA is also adjusted as often as every two weeks based on fluctuation of the local currency relative to the U.S. dollar.
As the U.S. dollar gets stronger, service members stationed in overseas locations can expect COLA payments to decrease. Members stationed in locations using the euro can expect their COLA payments to decrease due to the declining value of the euro against the U.S. dollar.
According to the Fiscal Year 2012 Annual Spendable Income Table, the average annual expenditures for COLA type goods and services, such as clothing, food and auto insurance, have decreased for all income ranges, causing spendable income to decrease.
For more information, visit the Per Diem Committee website at www.
defensetravel.dod.mil/perdiem/allowcol.html. You can also check out the COLA calculator online at www.defensetravel.dod.mil/site/colaCalc.cfm.