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Social Security COLA for Early Retirees
Old 01-13-2009, 11:10 AM   #1
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Social Security COLA for Early Retirees

I'm sure my question has been answered on this forum before, but there have been so many SS threads that searching them was impractical.

If you retire early, say at 55, does your SS benefit get increase by the COLA while not working?

For example, say your Benefit statement says you will get $2000/month at 67. When you get to 67 and take benefits, will you get $2000/month or will your $2000/month get the annual COLA increases from age 55 to 67?
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Old 01-13-2009, 11:11 AM   #2
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You get the increases each year whether working or not.
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Old 01-13-2009, 11:13 AM   #3
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Good answer
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Old 01-13-2009, 11:17 AM   #4
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Very nice to hear!! I had assumed the opposite, for no particular reason other than a skeptical, negative nature.
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Old 01-13-2009, 11:18 AM   #5
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Read the statement and you will see the word "PROJECTED". I believe that factors in the raises, they are not on top of that projection.

I'm sorry for being wrong. Will skip off to the corner and suck my thumb now!
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Old 01-13-2009, 11:27 AM   #6
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Read the statement and you will see the word "PROJECTED". I believe that factors in the raises, they are not on top of that projection.
I don't think this is the case.

If you look at your Estimated Benefits Statement, just above where your estimated benefits for age 62, full retirement age, etc. are listed, you will see the following statement: "These estimates are in today's dollars". This implies the amounts will change with inflation.

Further, when I retired in 2005 (age 58) my estimated benefits at age 62 were $1,483. Now, at age 62, they are $1751 - and I didn't earn a dime in wages during those 4 years.
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Old 01-13-2009, 11:30 AM   #7
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I'm sure my question has been answered on this forum before, but there have been so many SS threads that searching them was impractical.

If you retire early, say at 55, does your SS benefit get increase by the COLA while not working?

For example, say your Benefit statement says you will get $2000/month at 67. When you get to 67 and take benefits, will you get $2000/month or will your $2000/month get the annual COLA increases from age 55 to 67?
I'm no expert on this - but as I understand:

If you are looking at your annual SS estimate - the earnings for past years are indexed to inflation when computing the etimate - & will do so when you ultimately apply for SS & they do the computation.

You have to remember however that SS calculates the estimate on your 35 highest years of earnings - and the estimate assumes you will keep working/earning till 62 or 67.

If you have less than 35 years of earnings - some years will be calculated as a zero resulting in a figure that is less than the estimate assumes. How much less? I've never sat down & calculated - (but probably need to do that as I will be a few years short of 35 SS earning years when I plan to ER before age 50) - perhaps a whole 'nother topic for a new thread?
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Old 01-13-2009, 11:37 AM   #8
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Your statement will also show your projected earnings per year after 2007 or 2008. This will eventually not go to zero because it defaults to the last year of income. I think stopping work before 62, like 55, will have your projected benefit decrease due to the average SS wage limit increases. The COLA increase is usually is more so you shouldn't see a decrease on your statement.

My DW always tells me it won't be there anyways. I think I will start responding that "I am older and will get mine butyour s will already be given out to us old guys."
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Old 01-13-2009, 11:43 AM   #9
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Your statement will also show your projected earnings per year after 2007 or 2008. This will eventually not go to zero because it defaults to the last year of income. I think stopping work before 62, like 55, will have your projected benefit decrease due to the average SS wage limit increases. The COLA increase is usually is more so you shouldn't see a decrease on your statement.

My DW always tells me it won't be there anyways. I think I will start responding that "I am older and will get mine butyour s will already be given out to us old guys."
If I were you I'd watch my back as your DW will get what you're getting once you're gone.
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Old 01-13-2009, 11:44 AM   #10
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Further, when I retired in 2005 (age 58) my estimated benefits at age 62 were $1,483. Now, at age 62, they are $1751 - and I didn't earn a dime in wages during those 4 years.
True -- but as those statements say, Congress can change the plan at any time, so if someone is 50 and has retired, I wouldn't necessarily count on getting the current listed age 62 benefit plus 12 years of COLAs in 2021. Congress could change that in order to make it more solvent.
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Old 01-13-2009, 12:36 PM   #11
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Originally Posted by REWahoo View Post
"These estimates are in today's dollars". This implies the amounts will change with inflation.

Further, when I retired in 2005 (age 58) my estimated benefits at age 62 were $1,483. Now, at age 62, they are $1751 - and I didn't earn a dime in wages during those 4 years.
That is nice to see. I'll start collecting next Jan. at 62. Get it while the getting is good.
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Old 01-13-2009, 12:36 PM   #12
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This is from a SS document.

"To provide for price indexing after the age of 62. Benefits
are adjusted annually in December to reflect
increases in the consumer price index (CPI-W). The
benefit increase in 2005 was 4.1 percent. These cost of-
living adjustments are applied to the benefit for each
year after the person attained the age of 62—even if
the person was not actually receiving benefits.
"

I believe up to age 62 they use "average wage indexing" to determine your benefit then at 62 they use CPI to increase it yearly.
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Old 01-13-2009, 01:02 PM   #13
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Originally Posted by Texarkandy View Post
...You have to remember however that SS calculates the estimate on your 35 highest years of earnings - and the estimate assumes you will keep working/earning till 62 or 67.

If you have less than 35 years of earnings - some years will be calculated as a zero resulting in a figure that is less than the estimate assumes. How much less? I've never sat down & calculated - (but probably need to do that as I will be a few years short of 35 SS earning years when I plan to ER before age 50) - perhaps a whole 'nother topic for a new thread?
same boat - FIREd at 48, plan to take SS at age 62. That means 12 years of zero earned income from age 48-62 unless I get a PT j*b to get 2 more years for the 35 yr averaging function.
I have 33 yrs earnings including low paying part time jobs in HS and college.
My estimate of benefit at 62 already dropped $112 per month, with 2007 earnings = 1/4 annual salary, comparing consecutive annual stmts. I cringe to see the next drop with zero earnings in 2008.
I am pessimistically expecting to see it decrease radically, and then hit a steady state once they realize I have consecutive zero earnings (no j*b) years.
We shall see...the online calculator at SS was of no help to me.
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Old 01-13-2009, 01:05 PM   #14
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I believe up to age 62 they use "average wage indexing" to determine your benefit then at 62 they use CPI to increase it yearly.
I think eliminating "wage indexing" and replacing it with CPI adjustments is one of the more common suggestions for shoring up Social Security, though.
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Old 01-13-2009, 01:11 PM   #15
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I just got DW and mine in the mail. Apparently, together we will be able to collect $50,000 a year when we turn 67........

Yeah, like I believe that.......
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Old 01-13-2009, 01:36 PM   #16
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That is nice to see. I'll start collecting next Jan. at 62. Get it while the getting is good.
Not to rain on your parade, but if you turn 62 in January you won't see your first SS check until March unless your birthday is Jan 1 or Jan 2. I had the good fortune of being born on the 3rd of the month and my first SS check isn't scheduled to arrive until 69 days later.
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Old 01-13-2009, 01:43 PM   #17
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I just got DW and mine in the mail. Apparently, together we will be able to collect $50,000 a year when we turn 67........

Yeah, like I believe that.......
Yeah, you probably won't get much, if anything, as us old timers plan on using as much as we can till it runs out. I've got 2 years to go and I don't know if there will be much left even for me.
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Old 01-13-2009, 01:48 PM   #18
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Not to rain on your parade, but if you turn 62 in January you won't see your first SS check until March unless your birthday is Jan 1 or Jan 2. I had the good fortune of being born on the 3rd of the month and my first SS check isn't scheduled to arrive until 69 days later.
If you apply in a timely manner and were born in Jan (other than Jan 1st) your first check/credit deposit will be received on some Wednesday depending on the last two digits of your SSN in FEBRUARY. (If you are born on 1/1 the look at you like you were 62 during December last). They do this so that when we Croak they do not pay us for the month we do that. Seems like a long time when you were born early in the month - helps to be born late in the month (like me on the 30th of the month). BTW they have a "look back period" to take care of people that are eligible but do not apply early enough - the longest "look back" is 6 months (or alternatively you can just take a credit for the months you missed).

I reread this thing a couple of times and it seems my English composition could be improved but I am too old to learn now.
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Old 01-13-2009, 01:58 PM   #19
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You have to remember however that SS calculates the estimate on your 35 highest years of earnings - and the estimate assumes you will keep working/earning till 62 or 67.

If you have less than 35 years of earnings - some years will be calculated as a zero resulting in a figure that is less than the estimate assumes. How much less? I've never sat down & calculated - (but probably need to do that as I will be a few years short of 35 SS earning years when I plan to ER before age 50) - perhaps a whole 'nother topic for a new thread?
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same boat - FIREd at 48, plan to take SS at age 62. That means 12 years of zero earned income from age 48-62 unless I get a PT j*b to get 2 more years for the 35 yr averaging function.
I have 33 yrs earnings including low paying part time jobs in HS and college.
My estimate of benefit at 62 already dropped $112 per month, with 2007 earnings = 1/4 annual salary, comparing consecutive annual stmts. I cringe to see the next drop with zero earnings in 2008.
I am pessimistically expecting to see it decrease radically, and then hit a steady state once they realize I have consecutive zero earnings (no j*b) years.
We shall see...the online calculator at SS was of no help to me.
I once downloaded a calculator (from SS also?) & tried to run this - but it wasn't very user friendly & I couldn't come up with a good estimation of what the impact will be.

I think it will be 4 or 5 missing years for me - my 4 enlisted army years weren't very significant earnings either (but the last 20 or so have been very good.) So yeah, I guess some part-time w*rk will be in order for me also in my 50's.

Someone on a forum (this one?) indicated once to me that the impact of a few missing earnings years wouldn't be very much. Still, it's enough to have me concerned.
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Old 01-13-2009, 02:06 PM   #20
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I think eliminating "wage indexing" and replacing it with CPI adjustments is one of the more common suggestions for shoring up Social Security, though.
Historically, US wages have generally increased faster than the CPI. I wonder if this will continue?
-- Factors favoring slower US wage growth in the future: Outsourcing by US companies, decline of the international competitive advantage the US has enjoyed since WW-I, unhampered illegal immigration
-- Factors favoring higher prices: Greater competition for commodities (e.g. oil) as demand increases in developing countries, higher costs for imported goods as foreign wages gradually climb and as the dollar weakens due to present US government spending/overall weakening of the US economy.

It would be ironic and problematic for the health of the SS system if they adopt CPI indexing just as that index is set to outpace US wage growth for decades to come. It would also be par for the course.
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