Is 8%/year SocSec increase additive to COLA???

[sakowitzm]

My FRA is 66 and 8 months and I intend to wait until age 70 to start claiming Social Security. I know that my benefit will increase each year for COLA. My question is this --> there are 3 years and 4 months between FRA and claiming. At 8%/year, does that mean that IN ADDITION to the COLA increases, I will also have my benefit amount increased by a total of roughly 28% or so? That would be 8% X 3, compounded, plus another 2.6% or so. Thanks for your responses.

 

[finnski1]

My FRA is 66 and 8 months and I intend to wait until age 70 to start claiming Social Security. I know that my benefit will increase each year for COLA. My question is this --> there are 3 years and 4 months between FRA and claiming. At 8%/year, does that mean that IN ADDITION to the COLA increases, I will also have my benefit amount increased by a total of roughly 28% or so? That would be 8% X 3, compounded, plus another 2.6% or so. Thanks for your responses.

Yes

 

[sakowitzm]

Thanks for the response. And WOWZA! Had not factored that in to my spreadsheet. Makes a huge difference, of course. From about $60K a year to $75K+ a year.

 

[Chuckanut]

Thanks for the response. And WOWZA! Had not factored that in to my spreadsheet. Makes a huge difference, of course. From about $60K a year to $75K+ a year.

As many here have said, the best annuity deal in the USA is delaying SS until 70 if you can do so. Most can’t which is why taking SS at 62 is so often done. But, if you can…

 

[GrayHare]

It's not really an 8% increase, of course, instead you simply receive benefits for fewer months, so the monthly amount is higher. You need to live longer than about age 82 to come out ahead by delaying the start of benefits. If longevity runs in your genes and you are generally healthy, it's a reasonable gamble.

 

[Alan]

As many here have said, the best annuity deal in the USA is delaying SS until 70 if you can do so. Most can’t which is why taking SS at 62 is so often done. But, if you can…

Yes indeed, a great deal. I am now only 13 months away from age 70 and I have been delaying in order to get this increased sum, in particular because my younger, fitter, wife has a much lower SS than me but if I die before her she will have her SS boosted up to my higher amount.

 

[Onda]

It's not really an 8% increase, of course, instead you simply receive benefits for fewer months, so the monthly amount is higher. You need to live longer than about age 82 to come out ahead by delaying the start of benefits.

it is a bet that will work quite fine for most of the people here.

The Equality of Opportunity Project

 

[qwerty3656]

it is a bet that will work quite fine for most of the people here.

The Equality of Opportunity Project

Especially for married couples - only 1 has to live long enough.

 

[GrayHare]

it is a bet that will work quite fine for most of the people here.

So, you're saying that on average, FIRE types live longer than the general populace. I never thought about that, but I can see the logic.

 

[audreyh1]

So, you're saying that on average, FIRE types live longer than the general populace. I never thought about that, but I can see the logic.

Longevity is linked to education and wealth as well as overall health and healthy habits.

 

[ShokWaveRider]

I took mine at 69. The difference was only around $200 a month. I would need to live to over 86 before I would start to lose anything. By that time I do not think that if I am still around, I will really care.

My Math, I could be being a little optimistic:

Total SS for 69th year / 2400 = Total Years to Break Even.

 

[Onda]

So, you're saying that on average, FIRE types live longer than the general populace. I never thought about that, but I can see the logic.

Well, not the crazy FIRE that quits a job at the age of 35 and lives on $2,000 a month.

Most people who leave jobs before the age of 65 are high-earners, well-off, and will live longer than the general populace. Most people FIRE between the ages of 55 and 64.
FIRE = voluntarily leaving a job. It does not include workers who were forced out of their jobs because of health reasons.

 

[Midpack]

I’m claiming at 70 in May. It still boggles my mind that someone is going to send me a huge check, COLAd thereafter, until I go poof - even if 85% of it will be taxed as ordinary income. I won’t believe it until I see it. And then DW in a couple years. Unbelievable…

 

[The Cosmic Avenger]

I'm thinking about treating it like an arbitrage situation -- if there's a huge recession when we're between 62 and 70, we both might start taking SS then, to preserve our investments, otherwise we'll do the 62/70 split for the lower/higher earner. (Although if it's a really good bull run up until we're 62, maybe we'll both defer, especially if we are having trouble spending down our portfolio.) We should be fine either way, but it's something I've been mulling over for a while.

 

[bada bing]

At 8%/year, does that mean that IN ADDITION to the COLA increases, I will also have my benefit amount increased by a total of roughly 28% or so? That would be 8% X 3, compounded, plus another 2.6% or so. Thanks for your responses.

Minor correction. The delayed credits are not compounded. It is calculated as a simple increase on the PIA for the total duration delayed. The calculation is 2/3 of one percent per month (8% per year) for each month after normal retirement age, up age 70.

 

[audreyh1]

I'm thinking about treating it like an arbitrage situation -- if there's a huge recession when we're between 62 and 70, we both might start taking SS then, to preserve our investments, otherwise we'll do the 62/70 split for the lower/higher earner. (Although if it's a really good bull run up until we're 62, maybe we'll both defer, especially if we are having trouble spending down our portfolio.) We should be fine either way, but it's something I've been mulling over for a while.

Absolutely! And some here did that in 2008 or 2009. You can start anytime you perceive a long term financial benefit.

 

[ShokWaveRider]

On a side Note, we received our SS 1099s today, that is pretty efficient.

 

[finnski1]

Minor correction. The delayed credits are not compounded. It is calculated as a simple increase on the PIA for the total duration delayed. The calculation is 2/3 of one percent per month (8% per year) for each month after normal retirement age, up age 70.

Good catch. Didn't catch the "compounded" by the OP
So his original calculation should really be 1 +.08 +.08+.08=1.24+(4 months *.067%)=1.267 or 26.7%
and not 1*1.08*1.08*1.08=1.2597+.0267=1.2864 or 28.64%

 

[sakowitzm]

Good catch. Didn't catch the "compounded" by the OP
So his original calculation should really be 1 +.08 +.08+.08=1.24+(4 months *.067%)=1.267 or 26.7%
and not 1*1.08*1.08*1.08=1.2597+.0267=1.2864 or 28.64%

Thanks for the correction. No complaints here!

 

[dmpi]

I’m claiming at 70 in May. It still boggles my mind that someone is going to send me a huge check, COLAd thereafter, until I go poof - even if 85% of it will be taxed as ordinary income. I won’t believe it until I see it. And then DW in a couple years. Unbelievable…

People on fixed income pensions have seen their buying power shrink due to inflation. For those people who are struggling, social security with its built in COLA can be a life saver.

 

[ScaredtoQuit]

SS at 70

I finally started collecting my SS at the age of 70 last March. And boy was it worth it! My gross benefit is now more than $4,600 per month! And with no deductions for FICA, state or city income taxes, I don't mind a 22% deduction for FIT which actually is only on 85% of that amount! Some people go to a lot of trouble to evaluate the breakeven point. But I look at it differently! If I die early and left four years of benefits on the table, at this point it doesn't matter! I'd be DEAD. However if I live for a long time, the enhanced benefit is a good form of longevity insurance!

 

[DrRoy]

Double compounding!

 

[pjm-7]

My FRA is also this year at 66and 8 months. I have been delaying it to get the increase and there is some longevity in the family. But wait, I have a variable annuity that was fully funded by a previous employer that will pay about $1500+ per month when I start payments in a few years. Hey, maybe it's time to start SS and blow that dough! FYI, the annuity is with a low fee company and it is not cashable or rollover eligible.

 

[pb4uski]

My FRA is 66 and 8 months and I intend to wait until age 70 to start claiming Social Security. I know that my benefit will increase each year for COLA. My question is this --> there are 3 years and 4 months between FRA and claiming. At 8%/year, does that mean that IN ADDITION to the COLA increases, I will also have my benefit amount increased by a total of roughly 28% or so? That would be 8% X 3, compounded, plus another 2.6% or so. Thanks for your responses.

Yes. The 8% is simple interest, NOT compounded, so for 3 year and 4 months it would be 26.67%.... 3-4/12*8%.

So you will get the 26.67% plus any COLA increases.

 

[audreyh1]

My FRA is also this year at 66and 8 months. I have been delaying it to get the increase and there is some longevity in the family. But wait, I have a variable annuity that was fully funded by a previous employer that will pay about $1500+ per month when I start payments in a few years. Hey, maybe it's time to start SS and blow that dough! FYI, the annuity is with a low fee company and it is not cashable or rollover eligible.

You can go ahead and blow that dough whether of not you start SS now.