Delaying Social Security could result in significantly enhanced benefits. A person who receives Social Security at age 70 receives about 77% more monthly checks than someone who applies at age 62.
However, in 2023, beneficiaries will receive a cost of living adjustment of 8.7%. This is his best in over 40 years. So if you’re eligible for Social Security but haven’t started your benefits, you might be wondering: Will he be missing out on a massive 8.7% raise in 2023?
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If I delay Social Security, will I miss out on the 8.7% COLA?
The short answer is no. If you’re eligible for Social Security, don’t miss her COLA of an unusually high 8.7% in 2023. To understand why, you need to know how Social Security calculates benefits.
Social Security payments are based on the main insured amount. This is the benefit he is entitled to receive at full retirement age of 67 if born after 1959. However, you can start receiving benefits at age 62. Add her annual COLA to the main insurance amount regardless of whether she is receiving benefits.
Let’s say your primary policy amount is $2,000 at full retirement age. You can start benefits as soon as you turn 62, but your benefits will be about 30% lower, at $1,400. If you had no benefits in the year your 8.7% COLA was applied, your primary benefit would be $2,174.
After one year, if you start benefits at age 63 instead of age 62, your benefits will be reduced by 30% to 25%. However, COLA applies to the main insurance amount, which is now $2,174.
If you start benefits at age 62, your check will increase to $1,521 (or 70% of $2,174). If you wait a year and claim at age 63, your first check will be $1,630 (or 75% of $2,174). In any event, the COLA applies to the main reward.
A high COLA allows you to wait past full retirement age, making Social Security delays particularly advantageous if delayed retirement credits are available. At maximum perks, he earns 8% more each year until he turns 70. However, each year the primary insurance amount increases and the 8% credit is based on the higher amount.
For example, suppose you have $2,000 in primary coverage and have reached full retirement age of 67. 8.7% COLA takes effect, but delays benefits by exactly one year and claims at age 68. The primary sum insured will be $2,174. But you get an extra 8% on top of that 8.7% COLA. Therefore, you will receive $2,347 on your first Social Security check.
When should Social Security start?
A COLA of 8.7% should not have a significant impact on when Social Security starts. COLA applies to base benefits, if eligible, regardless of when payments begin. Usually the best time to get Social Security is when you really need the money.
It’s wise to hold out for as long as possible to get the most out of Social Security, especially if you’re in good health and able to keep working. But most people don’t have that luxury.
If you can’t work, starting your benefits early may be your only option. Getting benefits early also makes sense if you’re in poor health and want to maximize your benefits for the rest of your life. Finally, if early benefits help you enjoy a better quality of life in retirement, it’s okay to accept a reduction.
Time your Social Security based on your life circumstances, not a specific year of COLA. If you are eligible for payment, you can benefit from your COLA regardless of when you receive your first Social Security check.
