This is why your Cost of Living Adjustment Increases even when you haven’t claimed – Social Security Increase in 2023 Part 2

The Social Security increase for 2023 is 8.7%. Another name for the Social Security increase is the Cost Of Living Adjustment increase, or COLA for short. The 2023 COLA increase of 8.7% was the largest Cost of Living Adjustment increase in the last 40 years. All people currently getting a Social Security benefit, saw their monthly benefit increase by 8.7% starting in January 2023.

In 2022, if someone was receiving a benefit of $2,000, then their benefit increased by $174 ($2,000 x 8%). Their new monthly Social Security benefit amount would increase to $2,174 ($2,000 + $174).

Many people think you have to be receiving Social Security to get the COLA increase – that’s not true. If you are between 62 and 70 years old, you still received that COLA increase of 8.7%. 

Every year you delay claiming your benefits past 62, your benefit is guaranteed to increase until age 70 by 6-8%. I call that a risk-free guaranteed rate of return. Where else are you going to find a risk-free guaranteed rate of return of 6–8% per year? Nowhere that I know of.

I tell everybody that this is one of the best deals around – but the story gets even better. Whatever the Cost of Living Adjustment increase is for that year, you can add on top of the 6-8%. That makes the deal even better. That makes the deal a lot better.

An Example of the Cost Of Living Adjustment Increase Being Applied

Let’s assume you were born in December 1959, and have a Full Retirement Age of 66 years and 10 months.

In December 2021, you turned 62, but decided to delay claiming your benefit for one more year, until age 63. By delaying that one year, you received a minimum guaranteed increase in your benefit of 7%. The COLA increase for 2022 was 5.9%. Add the COLA increase of 5.9% to the minimum guaranteed increase of 7%, and that brings the total to 12.9% (7% + 5.9%).

Just by delaying that one year, you increased your benefit by 12.9%. You are now locked into that increased benefit amount for the rest of your life. Pretty sweet deal.

Another Option

Let’s say a year goes by.

Now it’s December 2022, and you are age 63. For whatever reason, you decide that you still want to delay claiming your benefits for at least one more year. By delaying that additional year from age 63 to age 64, you received another minimum guaranteed increase of 6.94%. The Cost of Living Adjustment increase for 2023 is 8.7%. Adding the COLA increase of 8.7% to the minimum guaranteed increase of 6.94%, and the result is an increase for that year of 15.64%.

So just by delaying two years, you increased your Social Security benefit by 28.54%. That’s almost a 30% increase! And you’re locked into that increase benefit amount for the rest of your life. In this still very low interest rate environment, where are you going to get a 30% return on your money in only two years? The answer: “no where!”.

Now you know why I tell everybody to delay claiming Social Security benefits if they can. It is the best deal around. It really is an incredible deal, and it is available to everyone qualified to receive Social Security benefits.