Social Security: Why This Year’s COLA Could Make You Money If You Delay Retirement

Group of business person in discussion in the office.
pixelfit / Getty Images

Social Security recipients will be getting a big bump in their monthly payments next year, thanks to the highest cost-of-living adjustment in decades. This means seniors who haven’t yet filed for benefits might be tempted to do so now — but doing so could cost you money over the long term.

Retirement at Any Age: Get Retirement Tips That Fit Every Stage of Life
Learn: 5 Things You Must Do When Your Savings Reach $50,000

The longer you delay collecting Social Security, the higher your monthly payment. Even though the 2023 COLA of 8.7% will add more than $140 a month to the average payment, you are probably still better off waiting as long as you can to collect.

Even if you don’t collect benefits now, the 8.7% COLA will still factor into the amount you’re eligible to receive starting at age 62, The Washington Post reported. The adjustment gets compounded every year, so if you wait until full retirement age or later, your monthly payment will grow even more. The increase stops when you reach age 70.

“If you are full retirement age or older, your benefit will continue to increase at a rate of 8% per year until age 70 because of delayed retirement credits — a rate of gain very close to the 2023 COLA of 8.7%,” Rayyan Anees, a senior wealth planning strategist with Wells Fargo, told GOBankingRates in an email. “By filing now, you will be giving up a larger future benefit.”

Retire Comfortably

The advantages of waiting to collect Social Security have been well-documented, but in case you are new to all this, here’s a quick primer:

As GOBankingRates previously reported, the earliest you can sign up for Social Security retirement benefits is age 62. Each year you delay collecting benefits, your payment goes up. Full retirement age is between 66 and 67, depending on when you were born. Waiting beyond age 70 to sign up for Social Security will not increase your benefits, so you should file at age 70 if you haven’t already done so.

The benefit you receive is based on a primary insurance amount, or PIA, according to the Social Security Administration. The PIA, in turn, is directly related to the primary beneficiary’s career earnings through a benefit formula, and it’s the PIA that is increased by the COLA.

As the SSA notes, if you retire before your normal retirement age — the age at which retirement benefits (before rounding) are equal to the PIA — then your benefit will be lower than your PIA. But if you retire after reaching normal retirement age, your benefit will be higher than your PIA.

Retire Comfortably

Live Richer Podcast: Unexpected Ways Losing a Spouse Can Affect Your Finances and Retirement

When you factor in the compounding effect of the high 2023 COLA — not to mention subsequent adjustments in future years — waiting to collect your Social Security benefits can boost your payment even more.

More From GOBankingRates

Share This Article:

facebook sharing button
twitter sharing button
linkedin sharing button
email sharing button
Retire Comfortably

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
Learn More


See Today's Best
Banking Offers