A colleague, Col (ret) Doug Fowler, published an excellent piece of research at Air War College called The COLA Trap: Picking the Wrong Retirement Date Could Cost You Thousands. It surfaces a real, well-documented quirk in the High-3 pension formula—and it’s worth understanding. But “could cost you thousands” is doing some heavy lifting in that title, so let’s look at what the research says and how much weight it should actually carry in your retirement date decision. Ultimately, most of us will come out ahead choosing the retirement date that works best for our family and personal situation. The money isn’t game-changing.
COLA Trap 101
Under the legacy High-3 system, your pension is based on your highest 36 months of base pay. The wrinkle is in your first Cost of Living Adjustment. Every retiree’s annual COLA compares July-September inflation this year to July-September inflation last year. But your first COLA instead compares this year’s July-September inflation to whatever fiscal quarter you retired before—and that quarter is set by your retirement month, not your retirement day.
Retire in January-March, and you get the full year’s COLA essentially. Retire in October-December, and you get zero on your first adjustment. Retire in a middle quarter, and you get a partial cut. Critically, the formula treats every month within a quarter the same—so retiring June 1st versus April 1st makes no COLA difference, but retiring July 1st instead of June 1st (just 30 days later) can drop you into a meaningfully lower COLA bracket, on top of a smaller years-of-service bump than you’d get by simply waiting to the next quarter-end.
Fowler’s paper walks through two O-6s who retired a month apart in 2011. By 2019, the June retiree had out-earned the July retiree by over $1,000 a year in pension income—purely from this formula. In a steeper-COLA year like 2008, that gap over 11 years reaches almost $16,000.
His recommendation: retire at a fiscal quarter-end, avoid the third quarter (July-September) if you can, and March is the one month that’s mathematically immune to the inversion.
Big Money or Budget Dust?
That $16,000 figure is real, but it’s the most extreme example in the paper—cumulative over 11 years, in nominal dollars, for one pay grade in an unusually steep COLA year. For most rank/year combinations, the gap is a few hundred dollars a year, and some years there’s no gap at all.
Even a generously extrapolated lifetime number—say $100,000 spread across 40-50 years of retirement—shrinks fast once you discount it to today’s dollars. Compared to the wealth most of us build post-military, $100K over 40 years is closer to a rounding error than a lifestyle upgrade. It’s also not guaranteed to happen at all in your retirement year.
COLA Trap Decision Tree
Use it as a tiebreaker, not the center of gravity. If you’re genuinely indifferent between two dates, lean toward the quarter-end or even March.
Focus on fulfillment. If chasing a quarter-end date means delaying a civilian job start, disrupting a PCS or a school year, or working extra months away from family for a “maybe” benefit—skip it. The friction is certain; the COLA benefit is relatively small and not guaranteed.
A minor bump-steer: if your timing is flexible and you’re leaning toward a July-September retirement for no particular reason, shifting a quarter costs you nothing and avoids a historically weak spot.
Cleared to Rejoin
Fowler’s paper did the community a real service by surfacing this—it’s a legitimate, underreported quirk in the law, and if you’re indifferent on timing, take the free lunch. But your retirement date is one of the biggest calls you’ll make, and it should be driven by your family and your next mission first. If the dollar difference from the COLA Trap is what your financial success depends upon, there are other elements of your financial life that could use some time in the phase dock. The COLA Trap is only one factor in your next chapter. No need to let it be the anchor.
Fight’s On!
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