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Don’t Let Inflation Change Your Social Security Strategy

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Social Security benefits for existing beneficiaries will increase 8.7% in 2023 from 2022 levels. People who haven’t claimed their retirement benefits yet shouldn’t let that change their strategies for claiming Social Security benefits.

I regularly hear from people who see the boost in the Social Security cost-of-living adjustment (COLA) and say that makes them consider accelerating the date they claim Social Security retirement benefits.

They fear missing out on the COLAs. Don’t worry about that. The worry is based on a misunderstanding of how Social Security benefits are adjusted for inflation.

The benefit estimates you receive for Social Security won’t reflect this, but the COLA will be included in the benefits you eventually receive.

The benefit estimates tell you the primary insurance amount (PIA), which is your benefit at full retirement age, estimated as of age 62. Once you turn 62 the Social Security Administration stops factoring inflation in its benefits estimates.

But the benefits you receive will reflect the inflation that occurs after age 62. When you claim benefits, the PIA will be updated for the COLAs that occurred after age 62. Any additional adjustments, such credits for waiting to claim benefits after full retirement age, also will be reflected in the benefit you eventually receive.

This is one of the reasons why I say that Social Security understates benefits in its estimates. It might be because the agency doesn’t want people complaining to their congressional representatives that their benefits are less than Social Security estimated.

Don’t let inflation and inflation forecasts change your Social Security claiming strategy. You won’t miss out on an inflation adjustment by claiming benefits earlier than planned and in fact will receive a lower benefit than you would from waiting.

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