30 Nov Do you get the 8.7% Social Security increase if you’re not getting benefits yet?

Posted at 05:01h in Ask NJMoneyHelp, Retirement by
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Q. I decided to start taking Social Security at my full retirement age of 66 years and 4 months this past June. I was obviously happy to see that I was going to receive a COLA of 8.7% starting in January. Will people who haven’t yet applied for Social Security also get the COLA applied going forward even if they don’t claim for another year or two?
— Retired

A. We want to make sure everyone knows they can visit the Social Security Administration’s website for the most current and detailed information about benefits.
Social Security recipients like you were very glad to see a higher cost-of-living adjustment (COLA) boost in the wake of inflation.
COLA increases will be added to the primary insurance amount for people who are not yet receiving benefits as well as for those who are currently claiming benefits,
If you are not claiming benefits, there are ways to increase your benefit, said Amber Leach, a certified divorce financial analyst with Equitable Advisors/R.I.C.H. Planning Group in Morristown.

You can either try to hike your income before you retire or delay receiving your benefit, she said.

For instance, if you are working and have not claimed your benefit yet, then your benefit may increase depending on every year you continue to work, Leach said.

“Social Security bases your benefit on your top 35 working years so if you continually are earning a higher salary that will positively impact your benefit,” she said. “Every year you continue working if that salary is higher than your salary when you first started your career then it will replace that year as counting towards your 35 years of working.”

If you are not working, every year you wait to claim your benefit from age 62 to age 70 offers an increase in your benefit.

“If you claim your benefit before your full retirement age then you will receive a reduced benefit depending on your birthdate and how many months early you take it,” she said. “Taking your benefit at age 62, you can expect approximately a 30% reduction in benefits.”

But if you wait from full retirement age to age 70 to claim your benefit, you will gain approximately 8% for each year until age 70, she said. After age 70, there is no more increase or gain to your benefit.

The COLA increase for 2022 was 5.9% and for 2023 it is 8.7%, Leach said. Given the level of the COLA increase, it makes sense to have a discussion with your financial advisor to see if claiming early makes sense for you and your circumstances, she said.

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This story was originally published on Nov. 30, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.

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