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Even If You Postpone Your Retirement, Your Social Security COLA Will Remain Same

Social Security COLA
Social Security COLA; Source- AARP

Starting in January 2024, your recurring payment will increase by 3.2% if you get Social Security payments. Claiming Social Security payments before reaching full retirement age (FRA) has its justifications. Not one of them, though, is the fear of being omitted from the yearly COLAs.

Social Security COLA

Social Security COLA; Source- MARCA

Effects Of Delaying Retirement On Social Security Benefits

You don’t need to be concerned at all that delaying your retirement will have a detrimental effect on your benefits. Not only do annual COLAs affect Social Security benefits that are currently payable. Additionally, they are added to future beneficiaries’ base benefit amounts. This implies that when you start getting your Social Security pension payments, you’ll eventually profit from the 2024 COLA. Of significance is the COLAs compound. Let’s take a scenario where you could have started getting Social Security payments at age 62 in 2022, but you decided to wait until 2027, when you will have reached your FRA of 67, instead.

Commencement Of Social Security COLA

When you begin collecting benefits, the substantial 8.7% rise for 2023 will be supplemented by the 3.2% COLA for 2024. And so would any subsequent COLAs that are implemented between right now and 2027. COLAs for Social Security haven’t always existed. Before 1975, an actual congressional act was required to raise Social Security benefits. All but three of the years since then have seen annual modifications reported. Politicians recognized that the purchasing power of retiree benefits was being diminished by inflation, which is why Social Security COLAs were instituted. They enacted laws to modify benefits following the annual rate of price increases.

Assessment Of Social Security COLA

It’s not an ideal framework. The CPI-W, the inflation measure used to determine COLAs, has come under fire for failing to appropriately account for expense increases that seniors face. Furthermore, only the CPI-W averages from the 3rd quarters of the prior and current years are compared by the Social Security Administration. Those periods may not accurately reflect the impact of inflation on retirees. Still, the method used to calculate COLAs does not unfairly disadvantage someone who chooses to defer receiving Social Security payments. Both present as well as future Social Security beneficiaries suffer from inflation.

Social Security Retirement Benefits

Yet COLAs benefit both parties. It’s a wise financial decision to hold off on receiving Social Security until your FRA. The early retirement penalty won’t apply to you. If you work after you begin getting Social Security retirement benefits, you won’t have any clawbacks in benefits. It’s even feasible that your base pay will increase. Social Security bases its benefit calculations on the 35 years with the highest earnings. In the final years before they retire, many Americans will make more money than they did at the beginning of their careers. But there’s a more astute maneuver. Delay taking out Social Security benefits for retirement until after you turn 70. More than 90% of Americans ought to delay until they are 70 years old to begin receiving Social Security benefits to optimize their lifetime benefits, according to a 2022 analysis by economists.



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