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AIPROPX ReportCNBC · 1d ago
Why to delay claiming Social Security
The Social Security cost-of-living adjustment next year may be higher than the 2.8% benefit increase beneficiaries saw in 2026, according to the latest projections.
That might lead some older adults to consider claiming Social Security retirement benefits now — to ensure they benefit from that relatively large COLA — rather than delay until later.
But experts say it generally pays to delay, even if the cost-of-living adjustment for 2027 turns out to be larger than average. Retirees get a higher payout for each year they delay claiming benefits, up to age 70, and the annual COLAs help to boost those increases.
"You need to protect yourself against living a long life, and you don't want to have regret," said James Mahaney, a certified financial planner and principal at Mavericus Retirement Services in Georgetown, South Carolina.
"Social Security is your best tool to get there," Mahaney said.
Social Security benefits are adjusted annually through cost-of-living adjustments, which are aimed at helping benefits keep pace with inflation.
Recent estimates have found the Social Security COLA for 2027 may be between 3.4% and 3.6% — which would be the largest increase in the past several years as inflation remains elevated due to factors like the Iran war.
The official calculation is usually announced by the Social Security Administration in October.
The amount of the increase varies per year.
In 2026, about 75 million Americans saw a 2.8% benefit boost to both Social Security and Supplemental Security Income benefits.
In 2022 and 2023, the annual COLAs climbed to 5.9% and 8.7% , respectively, which were the largest increases in decades in response to high inflation. In other years, like 2010 and 2011, the annual adjustments were 0%.
The official calculation for 2027 will be based on third-quarter inflation data.
The trade war between the U.S. and Canada — which economists said they expect to raise consumer prices — may only have a moderate effect on the 2027 COLA estimates, since it happened later in the third quarter, said Mary Johnson, an independent Social Security and Medicare policy analyst.
The pending COLA announcement comes as looming insolvency in Social Security's retirement trust funds have prompted calls for changes — including potentially changing the way COLAs are measured. The trust fund the program relies on to pay retirement benefits is expected to run dry in six years, at which point those monthly checks would be funded only by payroll taxes. Millions of people would see a cut to their monthly benefits, absent changes by Congress.
The Committee for a Responsible Federal Budget, a non-profit organization focused on educating the public on fiscal policy issues, has proposed capping the annual increases for beneficiaries who receive the largest benefits.
Any possible changes to benefits would need to be enacted by Washington lawmakers.
For now, experts still generally recommend waiting to claim Social Security benefits, unless personal circumstances like a poor health prognosis suggest it may be better to start sooner.
Prospective Social Security beneficiaries may fear they'd miss out on getting a big cost-of-living adjustment if they don't claim benefits soon.
But this isn't necessarily true, according to research and financial experts. And, waiting to claim benefits — even if for a few months or years , if possible — is one of the best ways to enhance financial security in retirement, experts said.
That's because for every year beneficiaries wait past their full retirement age up to age 70, they stand to get an 8% benefit increase .
The Social Security Administration provides benefit statements to pre-retirees who haven't claimed yet that include estimated monthly benefits for each claiming age:
For example, a retiree may see they're eligible for $2,250 per month at age 62, $3,000 at full retirement age and $3,960 at 70, Mahaney wrote in a July research paper titled "The Hidden Optionality of Social Security: Why Waiting to See Each Year's COLA Can Pay Off."
These estimates don't account for Social Security COLAs, however.
Once the annual cost-of-living adjustments are included, payments would increase from $2,250 at age 62, to $3,205 at 66 and to $5,091 at 70, according to Mahaney's estimates.
Waiting from age 62 until 70 to start receiving Social Security retirement benefits provides an approximate 76% total benefit boost, as well as roughly 76% more of every annual cost-of-living adjustment, Mahaney writes in the research.
In other words, retirees stand to benefit more from annual COLAs by delaying.
Mahaney's analysis is based on the comparison of two hypothetical Social Security beneficiaries — one who claims at age 62 in 2016 and another who claims at age 70 in 2024 . Both individuals have a primary insurance amount — or, the benefit at full retirement age — of $3,000 per month. The analysis uses historical COLAs for the years 2017 to 2026, and then assumes a 2.5% flat COLA for future years.
For each retiree, the decision of when to claim not only impacts the size of their benefits, but it also impacts the increase they see from the Social Security COLA, according to Mahaney's research.
For example, the 8.7% COLA in 2023 — the highest in four decades — would have provided the retiree who claims at 62 years old $225 more per month, according to the scenarios in Mahaney's research, while the other retiree who claims at 70 would receive a $395 monthly boost. That $170 difference in monthly benefits would add up to $2,040 over a year.
The differential between the benefits does not lapse, Mahaney wrote in the research. Instead, it becomes part of the base on which every subsequent COLA compounds, he wrote.
"Having a built-in cost-of-living protection is one of the central things that makes Social Security unique," said Joe Elsasser, a certified financial planner based in Omaha, Nebraska, and president of Covisum, a Social Security claiming softwar...
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