SSA Benefit of 2021

[YulumY985103]

Dear Sir/Madam,

I am 68 years old and have delayed taking my SSA benefit for two years already.  Recently, I have heard that SSA is going to give 6.5% increase this year.  

My questions are 

1.  Am I better to start applying for my benefit now to get the two 8% increase (hope 8% each year of delay taking the benefit) and wait for the 6.5% increase at the end of the year.

2.  If I wait till next year to get the three 8% increase, will I skip the 6.5% increase at the year end?

Which do you think is the better strategy for me?  Thanks for your suggestion and explanations.

Best Regards,

Yulum Yuan 

[GailL1]

@YulumY985103 

We do not know what the Cost of Living Adjustment will be for 2022 (based on 2021) - got two more months to go (August & Sept) in Consumer Price Index info before that determination is made - but it should be much better than what we have had in the recent history.  But with any COLA Social Security Adjustment in a given year, there is usually a Medicare Part B premium increase.  We can expect an increase in Medicare Part B premiums for 2022 - again the amount is to be determined but it could be hefty for several reasons.

Who knows what the COLA will be when it is announced for 2022 - usually in October - as of last month (July) projected to be a bit over 5% - is the economy gonna do real well in August / September - I don't know - too many things can affect it in this volatile time - specifically covid.

Every year, the SSA adjust the Average Wage Index (AWI) for computation of future benefits - this is where a person not yet receiving benefits get their bump in a good economy - the adjustment to the AWI and the subsequent computation of the AIME (Average Indexed Monthly Earnings ).

SSA.gov - National Average Wage Index 

from the link:

Indexed earnings used to compute initial benefits
When we compute a person's retirement benefit, we use the national average wage indexing series to index that person's earnings. Such indexation ensures that a worker's future benefits reflect the general rise in the standard of living that occurred during his or her working lifetime.

SSA.gov - Social Security Benefit Amounts 

Again from the link:

Average Indexed Monthly Earnings (AIME)
When we compute an insured worker's benefit, we first adjust or "index" his or her earnings to reflect the change in general wage levels that occurred during the worker's years of employment. Such indexation ensures that a worker's future benefits reflect the general rise in the standard of living that occurred during his or her working lifetime.

Good economies come and go - a COLA of 5% one year may turn into 0% or a small % the next year.

I am always a believer in a bird in hand philosophy -

What you DO have as a person over their FRA but NOT yet receiving your SS retirement benfits is the DELAYED RETIREMENT CREDIT - like you said, 8% a year added to your benefit from FRA to age 70 or each year that you delay filing for your benefits.

Personally, TO ME, that's a bird in hand.  I can only give you my opinion and why.

You can always figure it and make your decision.  But if you are gonna go with getting your benefits - file so that they start THIS YEAR cause the COLA, whatever it may be, starts the beginning of 2022.  

[YulumY985103]

Thank you for your prompt reply!  Since I read your reply, did you mean the better choice is to file my benefits before COLA adjustment in October 2021 and start collecting my benefits the beginning of 2022?  

If I originally planned to file for my benefits next year, is the best choice to file my benefits this year and start collecting my benefits at the beginning of next year?  That way I can start collecting my benefits several months earlier and get the 6.5% COLA.

What is the best strategy for me?  I am flexible to file this year or next year.

Thank you again and Best Regards,

Yulum Yuan

[GailL1]

@YulumY985103 

TO REPEAT:  Good economies come and go - a COLA of 5% one year may turn into 0% or a small % the next year.

I am always a believer in a bird in hand philosophy -

What you DO have as a person over their FRA but NOT yet receiving your SS retirement benfits is the DELAYED RETIREMENT CREDIT - like you said, 8% a year added to your benefit from FRA to age 70 or each year that you delay filing for your benefits.

Personally, TO ME, that's a bird in hand.  I can only give you my opinion and why.

So, for me, I would just wait and file at 70 and get the whole benefit of the delayed retirement credits in the benefit and then start getting the annual COLA % if & when there is one.  A COLA % of a much larger benefit, which you would get if you wait til 70, is a larger amount.  

You asked:

If I originally planned to file for my benefits next year, is the best choice to file my benefits this year and start collecting my benefits at the beginning of next year?  That way I can start collecting my benefits several months earlier and get the 6.5% COLA.

There is no assurance that the COLA will be 6.5%.  October (maybe November) 2021 is only the month when they usually announce what the COLA will be beginning for January of the next year.  If you wait that long to file, you may not get on the SS benefit rolls for 2021 and the COLA only goes to those who are getting benefits in 2021 NOT beginning in 2022.

IF you are gonna go with getting your benefits now - file so that they start THIS YEAR cause the COLA, whatever it may be, starts the beginning of 2022.  

You have to be on the benefit rolls in 2021 to get the COLA % increase in 2022 - remember that SS pays one month in arrears.  

AARP 07/16/2021 - Social Security COLA 2022: How Much Will Benefits Increase Next Year? 

[YulumY985103]

Thank you!  My birth month is July.  I will apply my benefits immediately in order to be on the rolls in 2021.  I hope I can get 2x8%+a high COLA increase next year!

Best Regards,

Yulum Yuan

[GailL1]

@YulumY985103 

Well, OK - it is your benefit - just hope the economy keeps moving.

Here is what we have gotten historically as COLA.  Just FYI.

https://www.ssa.gov/OACT/COLA/colaseries.html 

[YulumY985103]

Today, I have talked with a SSA personal on the phone.  The answers to my questions are,

1. If I file my benefits today and get approved, I will get xxx dollars plus 21 days partial payment of August.  My birthday month is July.   It is a little more than the number I calculated from the amount of 2019 that I saw on my statement+2x8% increase for the two years delay filing my benefits).  The little extra money are the increase of the COLA for 2020 and 2021 ( I guess).
2. I won’t lose my big COLA raise if there is one for 2022.  It will be included on top of the 8% increase if I file my benefits till my birthday of next year.

Wow, I feel the way of American doing is very fair and accurate.  There is no complain or question on it.