Approaching the age of 62? What you should know about Social Security’s 8.7% COLA

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Thanks to the largest cost-of-living adjustment in 40 years, current Social Security recipients will receive an 8.7% increase in their benefits for 2023 starting this month.

If you are or have reached the Social Security retirement age of 62, you may be wondering if you should claim benefits to participate in the COLA increase.

Experts say that, in general, it’s still best to wait.

“Don’t feel like you’re going to miss out if you don’t apply now,” said Joe Elsasser, founder and president of Covisum, a Social Security claims software company.

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If you claim Social Security retirement benefits at age 62, your monthly checks will generally be reduced. Wait until full retirement age — in the range of 66 to 67, depending on when you were born — and you will receive 100% of the earned benefits. Defer even longer – up to age 70 – and you’ll earn up to an 8% premium for each year you delay reaching full retirement age.

According to Elsasser, COLA increases your so-called primary insurance amount every calendar year after you reach the age of 62 – the benefit that you are entitled to when you reach full retirement age.

As a result, people who turn 63 this year will receive the 8.7 percent cost-of-living adjustment whether or not they used their benefits, Elsasser said.

If they keep waiting, they’ll get higher benefits, too, as discounts for early enrollment are reduced, he said.

This year’s lesson for early retirees

What pensioners are now experiencing could also be a lesson for early retirees, said Elsasser.

For current beneficiaries, the COLA of 8.7% is calculated based on their benefit level. The longer you’ve waited to claim, the greater your benefit and the greater the COLA you’ll see.

Those who applied for Social Security early still receive the same COLA rate, but based on reduced benefit amounts.

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To make up the deficit, they may have to tap their retirement investment portfolios for more money, assuming they have those assets to fall back on at all. And they may have to make those withdrawals from portfolios that have declined due to rocky markets just to maintain their standard of living, Elsasser said.

The lesson? “A bigger Social Security check certainly softens that blow,” Elsasser said.

What to do when approaching qualifying age Approaching the age of 62? What you should know about Social Security’s 8.7% COLA

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