I’m waiting until age 70 to claim SS benefits. For the first extra 12 months, I understand my delayed retirement credits would each be worth
.06667 x (age 66) monthly benefit. Would the value of each DRC go up in subsequent years with COLA increases to my estimated monthly benefit or stay the same as the original DRC? Thanks.
Hi. Yes. However, delayed retirement credits (DRC) aren't compounded. Any DRCs that a person accrues are applied to their primary insurance amount (PIA), which is equal to the amount of a person's Social Security retirement benefit if they start drawing benefits at full retirement age (FRA).
Cost of living (COLA) increases raise a person's PIA, though, which in turn raises the dollar value of each DRC. For example, say Bob files for benefits at age 70. Bob's full retirement age (FRA) is 66, and his PIA at the time that he reached age 66 was $1800. However, by the time Bob reaches age 70 his PIA has increased to $2000 due to COLA increases. Bob earned 48 DRCs by waiting until age 70 to start drawing his benefits, raising his benefit rate by 32%. That 32% increase would then be applied to Bob's COLA-increased PIA, resulting in a monthly benefit rate of $2640 (i.e. $2000 x 1.32).