Should I Start Drawing Benefits Sooner To Take Advantage Of The 2.8% COLA?

Oct 18 2018 - 9:27am

I used your software to determine my current filing plan. However, there is now the twist of the just announced COLA tossed into the mix. I turn 70 in May 2019. Would it be advantageous start in December and forgo the 3.67% but with the compounding of the announced COLA of 2.8%, it seems that it would come to just over the 32% increase I am currently waiting for AND get an extra 5 months of benefits?

Hi,

No. You'll get the 2.8% cost of living increase (COLA) regardless of when you start drawing your benefits. All Social Security COLA increases that take effect after a person reaches age 62 are included in their benefit rate whether they are drawing benefits or not.

So, if you start drawing your benefits effective with December you'll simply lose 5 months of delayed retirement credits (DRC), which would mean that your benefit rate would be roughly 3.67% lower than your age 70 rate. Furthermore, if you start drawing benefits effective with December you would initially only be credited with the DRCs you've earned through December 2017. That would make your initial benefit rate roughly 10.67% lower than your age 70 rate. You would then be due a recomputation effective with your payment for January 2019 to credit the additional 11 months of DRCs earned in 2018, but Social Security might not get around to actually doing that recomputation until some time in the year 2020.

Bottom line, the decision on when to start drawing your benefits is ultimately up to you, but the recently announced COLA shouldn't factor into your decision making. You'll get that increase regardless of what you decide to do.

Best, Jerry