Understanding the Military Overseas Cost of Living Allowance (COLA)
When considering military service, one realization you must be aware of is that you could be stationed anywhere on the planet to support the mission of the Department of Defense. While no military deployment or overseas duty station -- or any duty station, for that matter -- is permanent, it can be expensive to live far from home.
The higher cost of living that can accompany an overseas military deployment is compensated monetarily through the Cost of Living Allowance (COLA). This is different from the Basic Allowance for Housing (BAH), which accounts for a significant part of the rent or mortgage of the military member when at a permanent duty station.
In addition to salary and bonuses, the military provides several allowances to offset the cost of living and housing for service members. For instance, soldiers who live on an Army base in the barracks receive military housing and meals for free. However, if your duty situation requires you to live off base, the military provides allowances for such things as housing, meals, clothing, travel, moving, and family separation.
The Overseas Cost of Living Allowance is the military's answer to its members being stationed in various places throughout the world where the cost of living is higher. The COLA is a non-taxable supplement based on average pay and the cost of housing for the local population.
Depending upon where you are stationed, how many years you've been in the service, your rank, and if you have dependents or not, the COLA will vary greatly.
The average supplement is $300 per month. The basic measurement is a comparison of continental United States (CONUS) shopping behavior and the aggregate shopping behavior at each overseas location. Military members are stationed at more than 600 different locations overseas, and this variable cost of living allowance helps monetarily when the military member and family have to live among the population where the military presence is located. (This includes Alaska and Hawaii.)
Overseas COLA is calculated by a complex economic database that takes into account the spending habits of Americans at home in comparison to prices for similar goods and services overseas. The result of this comparison is an index that reflects the cost of living. If prices at home or abroad fluctuate, it may affect the cost of living allowance. Therefore, the COLA is not a fixed amount.
Currency values can also affect the COLA. As the dollar strengthens or weakens worldwide compared to the currency of the military member's duty station, the COLA can also change.
These COLA adjustments are either immediate or made incrementally, depending on whether the payment will increase or decrease. For COLA changes based on data, increases are made immediately, but COLA reductions based on data are phased in per month to help minimize the impact. COLA changes based on currency are effective immediately for both increases and decreases.
The Cost of Living Allowance does not reimburse expenses but rather increases the paycheck of the military member every two weeks; this will offset higher overseas prices of goods and services. It does not compensate for remoteness, hardship, or non-availability of goods and services at remote duty stations.
Other Military Payments and Allowances
Military members may receive other payments and allowances in addition to military pay:
- The Basic Allowance for Subsistence is used to pay for food; it's typically a few hundred dollars a month.
- The Basic Allowance for Housing offsets the cost of housing when members live off-base; it varies from city to city.
- A Clothing Allowance pays for the replacement of uniforms and uniform decorations. For jobs that require civilian clothes, the military provides a civilian clothing allowance.
- The Moving Allowance pays for the transportation of household goods during a permanent change-of-station (PCS) move.
- Temporary Lodging Allowance covers the cost of temporary housing during a PCS move.
- Soldiers assigned or deployed to locations where the military will not move families will receive a Family Separation Allowance.