UNDERSTANDING THE OVERSEAS COLA CALCULATOR IS CRITICAL FOR TROOPS
If you’re going to work in any profession, it’s important that you understand how you’re being compensated for your efforts. This is where the overseas COLA calculator can come in handy for those serving in the military who are located outside of the continental United States. Use of the military overseas COLA calculator is even important for those serving in U.S. territories and Hawaii. You don’t have to be in another country to benefit. Learn more about this tool, how your rates can fluctuate, and where to find it.
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What is Overseas COLA?
Overseas COLA is essentially money that service members can receive while serving outside of the continental United States (OCONUS) in the event there is a higher cost of living where they are stationed or deployed. It is an allowance that isn’t taxable and rates are determined by using an overseas COLA calculator.
When goods and services OCONUS are higher than normal, this helps military members afford the cost of living where they are stationed and preserves their military pay for other essentials that their families may need.
It won’t provide you with reimbursement for goods nor provide compensation for various extras that may pop up, but it’s an important boost to service members' personal finances that can provide additional spending money on essentials, such as groceries, fuel, etc.
COLA overseas rates don't manifest in the form of a fixed amount of money. Therefore, this shouldn’t be treated as a guarantee or used in budgeting and financial planning. It's not advisable to use it for things such as financing, which require consistent income before making a proper decision upon purchase.
Exchange rates fluctuate and also heavily influence your overseas cost-of-living allowance. Additionally, the military can adjust the rate both positively and negatively. The latter is becoming a reality as the DoD unveils a new process for overseas COLA adjustments.
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Impending Decreases Arriving June 2023
If you’re a service member stationed overseas in the American Armed Forces, prepare to receive a lighter paycheck come June 2023. Beginning on the first of the month, overseas cost-of-living allowances will be reduced on many paychecks across the globe.
The Pentagon is implementing new restrictions on allowance fluctuations, which were paused for 90 days. OCOLA rates will decline for many of the estimated 230,000 troops that receive non-taxable OCOLA in addition to standard pay.
Some locations affected include Japan, Guam, and Australia. But even some areas of Europe will face decreases, as well as those stationed in Hawaii.
As mentioned by an official working at the Pentagon, “At the time, we were still implementing decreases in other areas such as Europe. For example, Germany had largely already absorbed their decreases, and so what we are seeing with more locations in (the Indo-Pacific region) this time around, it’s just kind of a natural next step to making sure that we’re ensuring parity across all of the theaters.”
However, the 4.6% increase in basic pay for the year 2023 is expected to help make up the difference. It means that most service members will be taking home more money than they did in 2022, even with OCOLA reduction.
Congress limited the Defense Department to implementing decreases only once every six months. Rates are based on a survey and country-specific fluctuations in currency and buying power.
“...OCOLA reductions were and are largely being driven by higher inflation rates here in the U.S., the contiguous U.S., as compared to many of the OCONUS locations, as well as the strengthening of the U.S. dollar in foreign currencies,” the Pentagon has stated.
How to Calculate Overseas COLA
Although fluctuations occur, there is a simple solution for determining how much funding you’ll receive through these payments. The DoD’s official overseas COLA calculator does all of the heavy lifting for you and is available online. You can find official rates with the ability to see accurate rates for your rank, location, time period, and more.
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