CalPERS explains how COLA is calculated and adds myCalPERS Cost-of-Living estimate

Raquel, the presenter in a California Public Employees Retirement System video, explained how cost-of-living adjustments (COLA) for CalPERS benefits are determined and showed a new myCalPERS estimate feature.

"It’s an annual cost-of-living increase to your CalPERS benefit that helps keep up with the rate of inflation," Raquel said, defining COLA and distinguishing the CalPERS calculation from Social Security’s COLA, which is calculated differently and paid in January.

The presentation said three factors determine an individual’s COLA: the Consumer Price Index for All Urban Consumers (CPI-U) published by the Bureau of Labor Statistics, the percentage in a retiree’s former employer’s contracted COLA provision, and the retiree’s year of retirement. The presenter noted that if inflation is below 1% in a year, "no COLA will be paid for that year."

On eligibility, Raquel explained that "an eligible retiree is a retiree on their second calendar year of retirement," and that beneficiaries and most survivors who receive a monthly benefit are also eligible; survivors receiving the 1959 pre-retirement survivor benefit were excluded in the presentation.

Using a numeric example, the presenter showed how CalPERS compares compounded inflation and compounded contracted COLA percentages and applies the lower of the two to a member’s base allowance. In the example, with a $3,000 base allowance and a 2% contracted COLA, the COLA increase was $60, producing a new monthly payment of $3,060. Raquel used 2025 CPI numbers as an illustration, noting "the 2025 annual CPI is 964.398" and that the 2025 inflation rate based on the CPI was 2.63%.

The video also explained compounding across retirement years: using the same base allowance, compounded COLA percentages produced progressive increases in years three through five (examples given in the presentation showed new monthly allowances of $3,121.20 in year three, $3,183.60 in year four, and $3,247.20 in year five), demonstrating the effect of compounding growth.

Raquel introduced a new myCalPERS feature, the Cost-of-Living Estimate, to let members preview their likely COLA without manual calculations. "By using this feature in myCalPERS, you’ll be able to see it instantly," she said. The presentation said the estimate tool is available March 19 through April 30 within the Benefit Summary page; after April 30, COLA amounts will appear on retirement benefit statements in myCalPERS.

For more information, the presentation directed viewers to calpers.ca.gov under the Retirees tab (Cost-of-Living/COLA), and to the CalPERS YouTube channel and Presentation Notes & Resources document for links and additional resources. The presenter concluded with a reminder that the Public Employees’ Retirement Law governs benefits and that the video provides general information only.

The video is available on CalPERS’ YouTube channel and the Presentation Notes & Resources file in the YouTube description provides links and further details.