Prepare to be amazed and dumbfounded by what I am about to show you. Over the last five years I  have spoken in front of thousands of financial advisors and individuals on the topic of Social Security.  It doesn't matter what their level of knowledge is, how many books they have read or seminars they  have attended, they are always blown away when I show them why their Social Security benefit  statements are wrong. They don't understand why they have never seen or heard this before, especially  because it is so amazing.  

RETROACTIVE COLA CREDITS 

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. If you delay claiming your Social Security bene ts until age 70, because of Retroactive COLA Credits, the Social Security Administration allows you to go back in time to the year when you turned age 62  and apply the COLA, from that year, to the Social Security bene t 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.  ey will give yo u re troactive  

COLA increases for the years during which you turned age 63, 64, 65, 66, 67, 68, and 69. Social Security will go back in time 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  amount of time that you delay claiming your benefits after age 62 will allow you to take advantage of the Social Security Time Machine of Retroactive COLA Credits.

Table 6.8 shows the amount of the Social Security benefits claimed at different ages.  The Social Security bene t 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.  

Table 6.8 shows the growth in the size of the Social Security check every year with a 3% COLA  increase if 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. 

Under Column B, in Table 6.8, 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. 

Column C, in Table 6.8, shows what happens when Social Security benefits are claimed at age 66.  Instead of receiving $1,500 per month at age 66, because of Retroactive COLA Credits, Casey’s  monthly check is increased to $1,688.  e 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  70. 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 why your Social Security benefit statements  are wrong. 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.