Social Security benefits questions

[Jay968]

Just a couple of questions regarding social security;

1 - I am turning 65 in a couple of weeks and unfortunately just went onto state (California) disability. I  probably will not be back to work for several months if at all. If I wait a year until age 66 to start collecting social security retirement benefits, will the amount of that benefit be the same as if I start collecting today or will it go up even though I no longer receive a paycheck? I've read confilcting answers to this question but somewhere saw that my benefit will increase between 6 and 8 percent even if I make no money anymore. Is this true?

2 - Do cost of living increases apply to those already receiving benefits or is it that once you start receiving them you are locked into an amount forever?

[vitom712041]

Hello Jay; I’m sorry to read about your disability and hope and wish the best for you.  Now, may I offer to you answers and information.

First, you may wonder what qualifies me to offer this response.  That’s a good question.  Let’s just say I am in a similar situation and God gave me the ability to cut through all the Kentucky wind.  Most of what I will offer is what I’ve leaned regarding my situation, which comes from the Social Security website.

Next, I strongly suggest that you create a user account on the SSA web site.  I did and it gave me everything needed to make informed decisions.  Once there the most important thing to know is that if you were born between 1943 and 1954, then your full retirement age (FRA) is 66.  My FRA is 66.  I just turned 63 last December so I have some time to get to my FRA.

Next, for me the difference between a monthly Social Security now and at FRA is about $500.  Keep in mind that our FRA is 66.  Do you know what your monthly benefit amount at age 65 will be?  You can find the answer on the SSA website.  You will also find out what an estimated amount will be for you if you delay receiving benefits until age 70.  Maybe that goes up by 8% a year, maybe you will go back to work and make $5 million a year or $15 per hour, or, God forbid, you pass away at age 69 1/2 without collecting a nickel.  That is why a bird in the hand is worth 2 in the bush.

As for cost of living adjustments (CoLA) they are declared by the SSA based on, basically, inflation.  Once you begin to receive a monthly benefit you are eligible for any CoLA declared by the SSA.  People who complain about the Social Securiy CoLA being small or non-existent must not know that the government excludes the cost of food and energy from many of its calculations of inflation.

I hope this helps.  Good luck.

[Jay968]

Thank you so much for the reply but with all due respect I am not sure you answered my question.

I do know what I can collect now, what I can collect once I reach my full retirement age of 66, and what I can collect if I wait until I am 70.

But what I am asking is if I do not work another day in my life from this point forward, do the benefits STILL go up from where they are now, or am I stuck at my current benefit regardless of when I start collecting?

If they DO go up, is the SS website still accurate as far as the amounts that they have listed for me, or is everything recalculated based on the fact that I will not have worked beyond today?

[vitom712041]

Ok.  Once you take your benefit you’re locked into that amount.  The only way that amount will increase is through a CoLA.

65 is one amount, 66 another and so on to 70.  That 8% we all hear about is the amount of the increase without any other contributions by you or an employer.  So if you don’t work anymore your benefit goes up by the 8%.  Keep in mind that 8% sounds like a big number, but it multiplies your monthly benefit amount by just 0.08

For me, that’s not enough to make me wait.  I’ll take a little bit less for a longer time.  Again, hope this helps.  Don’t hesitate to ask more questions.

[Jay968]

" Keep in mind that 8% sounds like a big number, but it multiplies your monthly benefit amount by just 0.08"

So lets say my monthly benefit for March 2018 would be $2000. I have no income and I don't collect anything until the following March of 2019.

Would my March 2019 benefit be $2000 plus 8% or would it be $2000 plus .08%?

[vitom712041]

March 2018 - $2,000

April 2018 - $2000 x 0.08 = $160; $160 / 12 = $13.33; $2,000 + $13.33 = $2,013.33.

Remember, that 8% amount is an annual amount.  In order to calculate a monthly increase you need to divide the annual increase, $160.00, by 12.  So the April monthly increase is $13.33.  For the May 2018 amount multiply $2,013.33 by 0.08.  Then follow the process used for Apri 2018.

There is an easier way.  The Social Security website will give you the an estimated FRA monthly benefit amount.  They’ll say estimate because they don’t know if you will continue to work and pay into the system.

Of course, if you know that you will not work, then that estimate is pretty accurate.  That’s my circumstance.  I checked my FRA monthly benefit amount by downloading my work history as reported on the SSA website and following the formulas.  I can walk you through that if you like.  The 8% amount is a short cut rule of thumb.

Hope this helps.  Let me know if you have any other questions.

[Jay968]

So in your example, the monthly benefit amount will go up approx. $13/month in April and a little more each month until I start taking the benefits a year later? So by the time the year is up, the montly benefit will have increased by a total of about $160? So $2000 in April of 2018 will be somewhere around $2160 in April of 2019 and that's where it will stay if I start collecting that month?

[vitom712041]

Yup.  For me it’s about $14.50 a month from age 65 to 66.  You should check the website for definitive information or call SSA.

Good luck.

[Jay968]

Thanks for the responses, I do appreciate it. For me, it's also around $14/month and though it's not that much, it does tell me not to start collectiing SS benefits till next year. My advantage is that I am on California disability (which is a very generous amount) for 2018 and this will keep me solvent for the next year. No need to start SS so why not go for the slightly higher monthly benefit that I will get a year from now. I may even try and live off of my 401k for another year and not take SS benefits until 2020. Every little bit helps.

Thanks again