Social Security offers a 5.9% cost-of-living adjustment. What if I am delaying my benefits?
The Social Security Administration officially published the 5.9% cost-of-living adjustment (COLA). The 5.9% COLA increase is the largest adjustment to the benefit in 39 years. So how does this affect those delaying their benefit? First, let’s start with how Social Security calculates the COLA, and then, how those both receiving the benefit and delaying the benefit are affected.
COLAs have been calculated based on the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective. The CPI-W measures the changes in consumer prices to which certain workers are exposed. All of that to say, we have seen higher inflation since the Covid-19 pandemic and Social Security must accurately adjust the benefit in accordance with that inflation.
Now how does this affect those receiving the benefits? If you are receiving Social Security benefits, then you will begin receiving the updated benefit amount including the COLA in January of 2022, But, what if you are delaying benefits? The good news is, everyone eligible for Social Security retirement benefits receive credit for all of the Social Security COLAs that occur after they turn age 62, regardless of when they choose to start drawing their benefits. So, there’s no need to rush to file for Social Security before January.
The 5.9% COLA will boost the average monthly Social Security retirement benefit to $1,657 next year, up $92 per month from this year’s $1,565 average benefit. This 5.9% COLA will also raise the cap on the amount of Social Security an individual may receive in a year, from $3,148 per month, to $3,345 per month.
Please speak with a financial professional before deciding your Social Security claiming strategy.
IMPACT OF INFLATION - SOCIAL SECURITY BENEFITS
October 22, 2021
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