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Existing Social Security beneficiaries are poised to receive an 8.7% increase in their 2023 benefits starting this month, thanks to the highest cost-of-living adjustment in 40 years.
If you’re 62 or close to age, you may be wondering if you should claim benefits to get your COLA boost.
Experts say it’s still generally best to wait.
“Don’t feel like you’re missing out if you don’t claim now,” said Joe Elsasser, founder and president of Covisum, a Social Security claim software company.
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In general, if you claim Social Security retirement benefits at age 62, your monthly checks will be reduced. Wait until your full retirement age — 66 to 67, depending on when you were born — and you’ll have 100% of the benefits you’ve earned. Defer claiming longer—until age 70—and you’ll earn up to 8% more for each year you delay past full retirement age.
The COLA increases what’s known as the principal insurance amount — the interest owed to you at full retirement age — every calendar year after you turn 62, according to Elsasser.
As a result, people turning 63 this year will receive a cost-of-living adjustment of 8.7%, whether they claim their benefits or not.
If they continue to wait, he said, they will also get higher benefits as there are fewer deductions for early claiming.
This year’s lesson for retirees
Al-Sasser said that what the retirees are suffering now can also be a lesson for the retirees.
For existing beneficiaries, the COLA is calculated at 8.7% based on their benefit amount. The longer you wait to claim, the higher your interest, and therefore, the higher your COLA value you will see.
Those who claimed Social Security early still get the same COLA rate, but based on reduced benefit amounts.
To make up for the shortfall, they may have to tap into their retirement investment portfolios to get more money, provided they have those assets to draw from. Al-Sasser said they may have to make withdrawals from wallets that have fallen due to turbulent markets just to keep their standard of living the same.
the lesson? “A bigger Social Security check certainly cushions that blow,” El-Sayed said.
What to do when you are close to claiming age
Even if you’re not about to claim benefits, you should regularly check your Social Security statements, especially to make sure your earnings are properly recorded, said Jim Blair, vice president of Premier Social Security Consulting and former Social Security administrator. .
“If something is wrong, the sooner you find it, the easier it will be to fix,” Blair said.
Even if you plan to wait to claim until full retirement age or later, he said, it’s wise to keep an eye on estimated benefit amounts.
Starting to do this no later than your late 50s can help you plan for other streams of retirement income, Blair said.
One question to consider when deciding when to claim Social Security is whether your spouse will also be relying on your benefits for income. This could make a huge difference to their standard of living if she died and they had to rely on one income.
“The longer you wait, not only will your benefits go up, but so will the surviving spouse,” Blair said.
There are reasons you may want to claim earlier, such as if you have a child who may be eligible for benefits based on your record.
“You have to consider your whole general situation before you decide when to apply,” Blair said.