Social Security's 2027 COLA Increases Your Check by 3.6%. This Choice Could Increase It by 24%.
You could make a big impact on your Social Security benefit with this key decision.
In 2027, Social Security recipients will see a 3.6% cost-of-living adjustment (COLA) increase to their benefits. This adjustment is implemented to maintain the purchasing power of Social Security benefits against inflation. However, this modest increase may not significantly boost retirees' income, as the COLA is designed to simply preserve buying power rather than enhance it.
For those looking to maximize their Social Security benefits, there is a more substantial option available: delaying the claim. Social Security provides delayed retirement credits, which can increase benefits by up to 24% if claimed after reaching full retirement age (FRA). Delayed retirement credits are not applicable if benefits are claimed at FRA.
The impact of delaying benefits varies based on the age at which they are claimed. Claiming three years after FRA results in a 24% increase in monthly payments. For instance, if a recipient's benefit at FRA is $2,000, waiting three additional years would raise their monthly payment to $2,480, resulting in an extra $5,760 annually. The larger the initial benefit, the more significant the gains from delaying.
To benefit from this strategy, individuals should plan ahead. If still working, it's advisable to save enough in retirement plans to support oneself until Social Security benefits commence. Even if retirement occurs earlier than planned, there remains a possibility to increase benefits by rescinding previous claims within a year and waiting. However, repaying all Social Security payments already received is necessary to do this.
Alternatively, individuals may suspend their benefits after reaching FRA, allowing them to accrue delayed retirement credits that boost future payments until age 70. This approach can be advantageous if one can sustain themselves using other income sources, such as 401(k) distributions, IRAs, or savings. By suspending benefits and accumulating delayed retirement credits, retirees can potentially enjoy a substantial increase in Social Security income.
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