Why you Shouldn’t Claim at 62 #3: Your Social Security Benefit Amount Will be Larger than Suggested
Did you know that your Social Security Benefit statements are wrong? But in a good way, because you will actually have a larger Social Security amount if you delay claiming. Your actual benefit amounts are substantially bigger than what appears on your Social Security benefit statement.
On your Social Security statement, it shows the monthly benefit amounts you will receive at age 62 to age 70. That means your statement will show your monthly benefit at age 62, 63, 64, 65, 66, 67, 68, 69 & 70. Your monthly benefit will increase by a certain percentage for every year you delay claiming past age 62 to 70. The amounts shown starting at age 63, and up until age 70, are too low and will be bigger. Probably substantially bigger than the amounts shown on your statement. You should be aware of this before you claim your benefits.
Here is how it works. I am going to refer to the chart below to show you how this works.
An Example
The small chart on top (Chart A) will represent three benefit amounts from your Social Security benefit statement. Your statement says that if you claim your benefit at 66 (your assumed Full Retirement Age), Social Security will pay you a monthly benefit of $2,500. If you decide to claim your benefit early at age 62, then they will reduce your monthly benefit to only $1,875. If you decide to wait until age 70 to claim, they will increase your monthly benefit to $3,300.
Now look at big chart, (Chart B). Column A has your claiming ages between age 62 and age 70. Column B shows what happens if you claim your benefit at age 62. You start out receiving $1,875 per month, and your monthly benefit increases a little each year, because of an assumed COLA increase of 3.0% per year.
In Column C, it shows what happens if you were to claim your benefit at age 66. If you wait to claim your benefit at 66, you are not going to receive a benefit of $2,500 per month. You will receive an actual benefit of $2,813 per month.
The reason why your actual benefit is increased if you wait until age 66 to claim it, is because if you wait until age 66, Social Security will take that $2,500 and go back in time to the year you were age 62, they will see what the annual COLA percentage increase for that year was and they will apply that percentage to the $2,500. Then they will take that new bigger benefit amount, they will take it back in time again to the year in which you were age 63 and whatever the COLA percentage increase was for that year, they will apply that to your bigger benefit amount.
They will do that for the four years between age 62 and age 66, so if you wait and claim your benefit at age 66, you will not receive a monthly benefit of $2,500, you will actually receive a monthly benefit of $2,813. Your age 66 monthly benefit is increased to $2,813 because you received 4 years of Retro-active COLA credits.
The story gets even better, it gets a lot better, if you wait until age 70 to claim your benefit. If you wait until age 70 to claim, you are not going to receive a monthly benefit of only $3,300 per month, you will receive a larger Social Security amount of $4,180 per month because you will receive 8 years of Retro-active COLA credits. Ladies and Gentlemen that is incredible and hardly anybody knows it works this way. Before anybody claims their benefits, everybody should know about Retro-active COLA credits and that their actual benefit amounts will be substantially bigger than the benefit amounts that appear on their Social Security Benefit statement.
You get the benefit of Retro-active COLA credits only if you delay claiming your benefits past age 62. You don’t have to delay claiming until age 70 to benefit from Retro-active COLA credits. Even if you only delay claiming your benefits for 2, 3 or 4 years past age 62, you will still benefit from Retro-active COLA credits and your actual benefit amount will be substantially bigger than the benefit amounts that appear on your Social Security Benefit statement. If you claim your Social Security at age 62, you get NO benefit from Retro-active COLA credits.
This blog is #3 in a series of 4. To read the others, simply follow the links below:
#1: Guaranteed Increase in Benefit of 6.66% – 8.33% Every Year
#2: You’ll receive the smallest pay raise every year for the rest of your life
