I am about to amaze you with something you didn’t know about your Social Security statement. Over the last five years, I have spoken to thousands of financial advisors and individuals on Social Security. It doesn’t matter what their level of knowledge is, how many books they have read, or seminars they have attended. I blow them away when I show them how a Social Security statement can be wrong.
They don’t understand why they have never seen or heard this before, especially because it is so amazing. They don’t know their Social Security Statements might be wrong, but in a good way! Once you know about this, you can take Advantage of your Incorrect Social Security Statement now!
The Social Security Time Machine
Retroactive COLA Credits is another name for the Social Security Time Machine. They let you step back in time and take advantage of COLA increases from past years!
Delaying your benefits until age 70 will allow you to take full advantage of Retroactive COLA Credits.
Did you know?
If you delay claiming your Social Security benefits until age 70, the Social Security Administration allows you to go back to the year when you turned 62 and apply the COLA from that year, to the Social Security benefit you will start to receive at age 70.
This means they will increase your Social Security check by the same COLA percentage that you would have received if you had claimed your benefits when you were age 62. They will give you retroactive COLA increases for the years you were 63, 64, 65, 66, 67, 68, and 69. Social Security will go back and give you the COLA percentage increases for all of those past years. Even though you did not claim or start your Social Security benefits until you were age 70.
You don’t have to delay your benefits until age 70 to benefit from Retroactive COLA Credits. Any time you delay claiming your benefits after 62 will allow you to take advantage of Retroactive COLA Credits.
A visual Example:
Table 6.8 shows the amount of the Social Security benefits claimed at different ages. The Social Security benefit at the Full Retirement Age, age 66, is $1,500 per month. Claiming at age 62 reduces the benefit to $1,125 per month. And claiming at age 70 increases the benefit to $1,980 per month.
The charts assume a 3% COLA adjustment every year.
Look under Column B. This is where benefits were claimed at age 62. The benefits began at $1,125 per month, but every year, the size of the monthly check increased by 3%, and at age 66, the size of the monthly check grew to $1,266 per month. At age 70, their monthly check grew to $1,425 per month.
Table 6.8 shows the growth in size of the Social Security check every year, with a 3% COLA increase when benefits are claimed at age 62. It also shows how the Retroactive COLA Credits increase the size of the Social Security check when benefits are claimed at age 66 or age 70.
Column C, in Table 6.8, shows what happens when Social Security benefits are claimed at age 66.
Benefit Amount Growth with Retroactive COLA Credits
Instead of receiving $1,500 per month at age 66, because of Retroactive COLA Credits, Casey’s monthly check increases to $1,688. The Social Security Administration went back in time to the year in which Casey was 62 years old and credited her with the COLA increase for that year. They did the same thing for the years in which she was age 63, 64, and 65 years old. They gave Casey four years of Retroactive COLA increases, which increased the size of her monthly check to $1,688, when she claimed her benefits at age 66.
Column D, in Table 6.8, shows what happens if Social Security benefits are delayed and claimed at age Claiming Social Security benefits at age 70 results in receiving eight years of Retroactive COLA Credits, which increases the size of the monthly check from $1,980 to $2,508. By delaying the claiming of Social Security until age 70, and because of Retroactive COLA Credits, the size of the Social Security check, starting at age 70, has grown to $2,508.
Now you know how Retroactive COLA credits work, and how you can take advantage of your incorrect Social Security statement. The numbers you see on your statement, might not be what you can make! And now that you know, you can take advantage of the Retroactive COLA credits. Everyone should know this before they claim because their benefits at age 66 and age 70 are going to be bigger, chances are they will be much bigger, thanks to Retroactive COLA Credits. In fact, because of Retroactive COLA Credits, it makes the case even stronger for delaying.