My FRA is 66. and will file for SS at age 70. Question is on the order of compounding for COLA's and DRC's: Are the COLA and DRC (8%) applied together year-by-year during each of the four delayed years, or is only the COLA applied each year and then after the fourth year the full 32% DRC is applied to the inflation-adjusted PIA balance?

Hi. Cost of living (COLA) increases are applied to a person's primary insurance amount (PIA), and delayed retirement credits (DRC) are applied to the person's current PIA. A person's PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA). The best way to explain is by using an example.

Let's say Bob's full retirement age is 66 and at that time his PIA is $1800. Bob decides to wait until age 70 to claim his Social Security retirement benefits. Over the 4 years from when Bob is 66 to when he turns 70, COLA increases raise his PIA to $2000. When Bob claims his benefits at age 70 his DRCs would be applied to his updated PIA, raising his benefit rate to $2640 (i.e. 32% higher than his new PIA).

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Best, Jerry