It is intended to compensate service members for the high cost of living at certain duty stations.
[citation needed] The fundamental goal of COLA is to compensate service members for the high cost of living at certain duty stations.
COLA takes into account the availability of commissary, exchange, and hospital facilities at a specific duty station, because servicemembers without this infrastructure tend to have a higher cost of living.
Changes to an area's COLA are made along with changes to the exchange rate to maintain your purchasing power overseas.
It takes time for the Department and Defense Finance and Accounting Service to chart currency movements, set the COLA, and then distribute the money via payrolls.
On the reverse side of it, if the dollar rebounds, it will again take some time for service members to see a reduction in their COLA.
But over time, COLA adjustments will offset those changes and a member's purchasing power will remain steady.