Postponing the commencement of your Social Security benefits can significantly enhance your monthly payouts. It’s a widely recognized fact that an individual who chooses to defer their Social Security claim until age 70 stands to receive checks that are approximately 77% larger than someone who opts to begin benefits at age 62.
Nonetheless, the upcoming Cost-of-Living Adjustment (COLA) for 2024 has generated uncertainty among those who have yet to initiate their Social Security benefits. The COLA augmentation for Social Security disbursements is contingent upon the inflation rate between the third quarter of the preceding year (in this instance, 2022) and the third quarter of the current year (2023).
Will Delaying Social Security Payments Cost You a COLA Increase in 2024?
The precise percentage for 2024 will not be conclusively determined by the Social Security Administration until mid-October. Consequently, if you qualify for Social Security but haven’t commenced receiving payments, you may be contemplating whether delaying your benefits would result in missing out on the projected 3.2% COLA for 2024.
The direct answer is no, delaying your Social Security benefits will not result in missing out on the anticipated 3.2% COLA boost for 2024. To grasp why, it’s crucial to understand how Social Security computes benefits.
Social Security payments hinge on your Primary Insurance Amount (PIA), which is the benefit you’re entitled to receive at your full retirement age (67 for those born after 1959). Nevertheless, you have the option to commence receiving benefits as early as age 62.
When you become eligible for benefits at age 62, Social Security automatically factors in the COLA for each year, regardless of whether you’ve begun receiving payments or not.
Even if you opt to start benefits a year later, say at age 63 instead of 62, your benefit amount will still be higher due to the cumulative COLA adjustments that have been incorporated into your PIA. Although the anticipated 3.2% COLA for 2024 is noteworthy, it should not exert a substantial influence on your choice regarding the commencement of Social Security.
The most suitable time to initiate benefit receipt primarily hinges on your specific financial situation and requirements. Variables like your health, financial security, and retirement aspirations are central in determining the ideal age to initiate your Social Security disbursements. In the end, the decision of when to commence your retirement benefits is a personal one and should harmonize with your individual life circumstances.
The Cost-of-Living Adjustment (COLA) for a specific year will be applied to your foundational benefit, regardless of the timing of your choice to commence receiving Social Security payments. Ensure that your decision is well-informed and tailored to your financial circumstances, keeping in mind that there is no universally applicable answer to the optimal age for initiating your Social Security benefits.