Do You Lose Social Security Cost-of-Living Increases If You Delay Benefits?
One of the most common Social Security questions retirees ask is:
"If I delay taking Social Security, do I miss out on future cost-of-living adjustments (COLAs)?"
It's a fair question. After all, when headlines announce a large Social Security increase, many people worry that waiting to claim benefits means leaving money on the table.
The good news is that this concern is based on a common misunderstanding of how Social Security works.
In reality, delaying Social Security does not mean you lose future cost-of-living adjustments. In fact, if you wait to claim benefits, those COLAs are still applied to your benefit calculation, potentially increasing your future monthly income for the rest of your life.
Understanding how COLAs work can help retirees make better decisions about when to claim Social Security and avoid costly mistakes that could impact retirement income for decades.
What Is a Social Security COLA?
COLA stands for Cost-of-Living Adjustment.
The Social Security Administration uses COLAs to help benefits keep pace with inflation. When prices rise, Social Security benefits are adjusted upward to help retirees maintain purchasing power.
Before 1975, Congress periodically approved benefit increases. Beginning in 1975, an automatic formula was established to calculate annual increases based on inflation data.
Each year, the Social Security Administration reviews inflation measurements and determines whether a COLA increase will be applied to benefits for the following year.
Some years produce small increases. Other years generate much larger adjustments.
For example, retirees received one of the largest COLAs in modern history when benefits increased by 8.7% for 2023. Large adjustments like these naturally lead many people to wonder whether they should claim benefits immediately to capture the increase.
The Biggest Social Security Myth About COLAs
Many people assume that if they delay Social Security, they miss annual COLA increases.
The logic sounds reasonable:
- If you're not collecting benefits, you're not receiving the increase.
- If benefits go up while you're waiting, it seems like you're missing out.
- Therefore, it might seem better to claim benefits sooner.
Unfortunately, that conclusion is incorrect.
While you don't receive a monthly check while delaying benefits, the underlying benefit calculation continues to receive eligible cost-of-living adjustments.
In other words, the increases are still working in your favor even though you're not yet collecting.
How COLAs Are Applied When You Delay Benefits
The key concept is understanding your Primary Insurance Amount (PIA).
Your PIA is essentially the benefit amount you're entitled to receive at your Full Retirement Age (FRA).
According to Social Security rules, cost-of-living adjustments are applied to your benefit calculation beginning at age 62, whether you've claimed benefits or not.
That means if you are age 62 or older and decide to delay filing, future COLAs are still added to your benefit calculation.
Let's look at a simplified example.
Example
Assume your benefit at age 62 would be $2,000 per month.
Now assume Social Security announces an 8.7% COLA.
If you're already collecting benefits, your payment increases immediately.
If you're not collecting benefits yet, your benefit calculation still increases by 8.7%.
You won't see the increase in your bank account today because you're not receiving checks, but the increase becomes part of your future benefit.
When you eventually claim benefits, your monthly payment reflects those accumulated COLAs.
The Power of Compounding COLAs
This is where things become especially interesting.
If you delay benefits from age 62 to age 70, you don't just receive one cost-of-living increase.
You potentially receive years of compounding COLAs.
Each annual increase is added to the previous year's adjusted amount.
That means:
- One COLA increases your benefit.
- The next COLA is calculated on the higher amount.
- Future COLAs continue building on prior increases.
This compounding effect can significantly increase lifetime retirement income.
Many retirees underestimate just how valuable inflation-adjusted income can become over a retirement that may last 20 to 30 years or longer.
COLAs Plus Delayed Retirement Credits
Another important concept is that COLAs are separate from delayed retirement credits.
Many people mistakenly combine the two.
Here's the distinction:
- COLAs help your benefit keep pace with inflation.
- Delayed retirement credits reward you for waiting beyond Full Retirement Age.
For many retirees, delaying benefits after Full Retirement Age increases future benefits by approximately 8% per year until age 70.
Therefore, someone who delays benefits may receive:
- Years of accumulated COLAs.
- Delayed retirement credits.
- A larger base benefit for life.
This combination can create a substantially higher monthly income stream.
Why Inflation Protection Matters So Much
One reason Social Security remains such an important retirement asset is its built-in inflation protection.
Many retirement income sources lack this feature.
For example:
- Most pensions have limited or no inflation adjustments.
- Many bonds provide fixed income.
- Cash savings lose purchasing power over time.
Social Security is different.
The annual COLA adjustment helps preserve purchasing power as prices rise.
Although some retirees argue that actual living expenses increase faster than official inflation measurements, Social Security remains one of the few retirement income sources that automatically adjusts over time.
For retirees concerned about longevity risk, inflation risk, and maintaining spending power, this feature can be extremely valuable.
Should You Delay Social Security?
The answer depends on your unique circumstances.
There is no universal claiming age that works for everyone.
Factors that may influence your decision include:
- Your health and life expectancy.
- Your spouse's benefit situation.
- Your retirement income needs.
- Your investment assets.
- Your tax situation.
- Your goals for survivor benefits.
However, one factor that should not drive your decision is the fear of losing future COLAs.
That concern is largely based on misinformation.
If you're age 62 or older and delaying benefits, those eligible COLAs continue increasing your benefit calculation even while you wait.
Why a Social Security Analysis Can Help
Social Security claiming decisions can impact retirement income for decades.
A difference of just a few years in claiming age can potentially result in tens of thousands of dollars in additional lifetime benefits.
That's why many retirees benefit from running a detailed Social Security analysis before making a decision.
A comprehensive review can evaluate:
- Claiming at 62.
- Claiming at Full Retirement Age.
- Delaying until age 70.
- Spousal strategies.
- Survivor benefit considerations.
- Lifetime income projections.
Rather than relying on assumptions or headlines, retirees can make decisions based on actual numbers and projected outcomes.
Final Thoughts
Social Security cost-of-living adjustments are an important part of retirement planning, but they're often misunderstood.
The key takeaway is simple:
Delaying Social Security does not mean you lose future COLAs.
If you're age 62 or older, eligible cost-of-living adjustments continue increasing your benefit calculation even while you're waiting to claim benefits.
Combined with delayed retirement credits, these increases can significantly boost future retirement income.
Before deciding when to claim Social Security, make sure you're working with accurate information and evaluating how the decision fits into your overall retirement income plan.
Frequently Asked Questions About Social Security COLAs
Do I get Social Security COLAs if I haven't started benefits yet?
Yes. If you are age 62 or older, eligible cost-of-living adjustments are applied to your Social Security benefit calculation even if you have not yet claimed benefits.
Do I lose COLA increases by waiting until age 70?
No. Delaying benefits does not cause you to lose COLAs. Future increases continue to be applied to your benefit calculation.
What is a Social Security COLA?
A Cost-of-Living Adjustment (COLA) is an annual increase designed to help Social Security benefits keep pace with inflation.
What is a Primary Insurance Amount (PIA)?
Your PIA is the monthly benefit you are entitled to receive at Full Retirement Age.
Are COLAs and delayed retirement credits the same thing?
No. COLAs adjust benefits for inflation, while delayed retirement credits increase benefits when you wait beyond Full Retirement Age to claim.
Should everyone delay Social Security?
No. The best claiming strategy depends on health, income needs, life expectancy, taxes, marital status, and other retirement planning considerations.
Daniel Wendol
Item #1
00:00:01
hi everyone I’m Dan Wendol from Dolphin Financial Group and today we’re going to be talking about social security cost of living adjustments yes Social Security colas and in particular we’re going to answer the question I get quite frequently which is hey Dan if I delay my Social Security will I still get the cost of living adjustments even though I’m not collecting right now shouldn’t I collect right away in order to get that cost living adjustment I hear that quite often and we’re going to answer that
00:00:33
question today and when I say we I mean Tony sha and I there’s Tony sha looking quite confused actually um I was surprised you’re the guy that told me you want to talk about cost of living increases today because you saw the news for next year’s we’re getting an increase I I don’t think I ever said that that I want I’m totally denying it so I’m G put you on the spot Tony I’m G to add you the question I get often which is do I get the cost of living adjustments to
00:01:05
my social security benefit if I’m delaying benefits or do I lose out um you lose out I believe if you delay your benefits you do not get the cost of living adjustment where is my buzzer wrong oh you do they add it in okay get them all right so let’s talk about this cost ofing adjustments started 1975 when Tony was early 40s and um each year was I even born that’s a good question viewers want to know in the comments viewers put how old you think Tony is I bet you they think they you’re younger than I am
00:01:47
which is makes me sad but each year a formula determines um what the cost living increase is going to be and we’ve done shows on it I’ll put it up there if you haven’t seen it Tony and I have talked about it and Tony’s ranted about how upset he is about the formula and how it’s not tied to seniors it’s tied to nonsense and anyway yeah that’s not we’re going to talk about we’re going to talk about whether or not you get it but since 1975 there’s been a formula it
00:02:14
used to be I think Congressional Congress would meet and determine and say Here’s what we’re going to give the masses 1975 they made a formula okay so they do that and then each year and then they start giving more in January okay so this year um the highest Cola ever in history was in 1980 and that was a 14.3% increase wow yes and that was high that was High um that was the highest it’s ever been now we had a really big increase last year for 2022 and that was 5.9 and so in that recent show we did I
00:03:00
said we might see double digits we might see double digits in 2023 at the end of this year and so they’ve announced it social security has announced and we’re now in October of 2022 they’ve announced what they’re going to start giving as an increase and Tony do you know what it is I do it is 8.7% didn’t quite hit didn’t quite hit double digits no we didn’t and we all thought we were well no one thought we were I think people said we can get close and but I thought we were going to
00:03:31
be over yeah I thought nine my guess was 9.3 cuz I had heard that at one time floated by some talking head like in the nines between nine and 9.5 so I thought we’d be over nine but 8.7 is close and it’s still the biggest we’ve had since 1980 40 years right the last time we had anything this high was 1981 81 yeah and so yeah it’s been 40 years um that was 11.2% so you had 14% in 80 11.2 and 81 and then the next high it kept going down from there but the next highest uh after 81 the next highest was
00:04:11
last year 5.9 that’s right yeah that’s right so pretty high back then are we going to go back there and so a lot of people thought including myself we might see double digits this year but and here’s the link by the way if anyone wants to see what the history was you can go there and look at what cost living increases were but the big news s.gov of course yes the big news is 8.7 starting in 2023 yeah big headline today they just announced it this morning the official announcement they’ve been saying for a
00:04:45
few weeks hey we’re going to get a big increase people have been guessing but now it’s official it’s 88.7% and this is a good thing right a good big increase for cost of living because inflation’s High well you depends okay I mean it’s great that people so I do love the cost of living aspect of Social Security which is why I think it’s super important that people are smart about when they claim sure but um that means there’s inflation so right no one likes inflation I there has to be really high
00:05:18
inflation because the Social Security increase is never actually what actual inflation is at it’s always lower so you know if they’re giving us an 8.7 increase in our social security that actual inflation has to be higher than that typically I mean the government’s formula for figuring out inflation is a joke so and that’s what they’re going to say oh it’s 8.7 right well I agree the inflation’s probably higher than that real inflation but the numbers came in and now we’re down to it went lower
00:05:52
not as low as we wanted but the fed’s raising rates so no one likes the inflation but the cost of living and anyone on Social Security does like it right they do a lot of people say oh they’re going to give us the cost of living increase but they’re going to raise Medicare anyway Medicare so it washes out but no Medicare is gonna go down next year right boom for one of the first times ever ex it doesn’t wash out the uh that it always washes out when the uh cost of living is you know for 20
00:06:24
some plus years we’ve been at 0 to 3% in inflation right and so the cost the living would be 3% and then they raise Medicare costs 3% and so it would wash out but because inflation’s so high they actually had to give people more money to spend I think yeah and they lowered the cost of Medicare for next year which is interesting news that’s mainly due to the Alzheimer drugs not being as used as much as possible the costs being lower than expected but Tony this still doesn’t answer the
00:06:57
question which is um do I get the cost of living increase if I’m not on Social Security and you’re saying you’re saying I said no you wouldn’t but you say yes you do cost of living increases are added to your primary Insurance amount your Pia which is fancy speak for what you get when you hit your full retirement age so at your full retirement age that’s you get 100% of your Pia cost of living increases are added to your Pia when you’re 62 here’s the quote from Social Security here’s the
00:07:34
link you can go and read this publication from Social Security their words not mine you’re eligible I quote “you’re eligible for cost of living benefit increases starting with the year you turn a62” end quote sourced ssa.gov but here’s my argument sure they say your cost of living adjustment is effect or your Social Security primary Insurance amount goes up with that cost of living adjustment but if you don’t file at 62 so this in 23 it goes up 8.7% but if I don’t file until 2027 I don’t realize that
00:08:19
money you do you see what I’m saying you don’t see the money in your pocket because you’re not touching it but your Pia goes up by 88.7% so next year when you so if you’re 62 right then you look and you’re not claiming if you’re claiming you get the 8.7 you see it immediately right because you’re claiming it goes up if you’re delaying which should be what most people do is delay if you delay you will see your Pia go up even though you’re not claiming so that when you do claim
00:08:53
it’ll be 8.7% higher next year and then you get compounding cost of living increases from age 62 all the way to 70 if you delay to 70 so you do still realize some gains even if you wait a few years to file and this is not to be confused with your Inc the amount you get increasing as you wait you get 100% at 67 for most people now right so at 62 you’re getting 70 something percent you know six every year you wait getting you’re getting a percentage of a higher number is of a higher amount which is
00:09:28
your Pia right and then your Pia is also increasing with the cost of living once you hit 62 now for us we’re not 62 so our Pia is not impacted by the cost of living increase right but I get I get that ours is still growing because it’s a 35y year formula right okay right I think that caller was probably calling to weigh in on our argument uh that’s why the phone rang is somebody was like no Dan’s wrong and Tony’s right I’m sure that’s what they were going to
00:09:56
say you could see that I am not in my regular office today no you’re actually in our Spring Hill office which is in north of Tampa area and so I don’t have much control over the phone system I thought I unplugged it but I did unplug it and yet it’s got no power yet it ranked so I’m a little nervous to be honest yeah that’s scary Halloween is coming up but no you’re right I mean and obviously I’m just guessing you’re the financial expert here and so I’m glad you clarified that
00:10:21
for me and our listeners because Social Security and these benefits can get confusing and it’s good for people to know hey I am going to get this well a lot of a lot of the chatter that I’ve seen is don’t delay Social Security because you’re going to miss out on the 88.7% increase take it now right so I mean we talked a lot about when to take Social Security we have a whole series of shows on that but um and I’ll put them up here you can watch but it’s false that you miss out on the
00:10:53
cost of living increase if you are delaying Social Security yeah if you’re not 62 you don’t get the in but then you can’t claim anyway right so if you let’s say you waited till 70 do you miss out no you get compounding eight years of cost living adjustments so from 62 all the way to 70 compounding so your Pia is going up well Pia maxes out at your full retirement age which is 67 and then if you wait from 67 to 70 that’s three years well you get delayed retirement credits
00:11:25
that’s 8% not compounding so what would happen is 62 is your Pia is here cost of living cost of living cost of living cost of living for eight years and then on your when you’re hit 70 then you get a 24% bump because you get three years worth of delayed re retirement credits so you get a a delayed retirement credit bump on top of the cost of living so nice you know it’s not lost and that’s very important for people to understand that’s good that’s good and I was confused on that but what you’re saying
00:11:56
makes sense and that’s true Tony you cut out for a second can you repeat that you were what you were confused is that what you said oh you know what uh yeah we you must have heard wrong because surprise surprise surprise surprise nothing but noise right here uh NBN nothing but noise was confused yeah no yeah it is the formula for Pia is confusing the formula for Social Security is confusing and then we’re not talking about that we’re talking about the cost of living increases but you thought that you
00:12:29
didn’t get it and that’s a reasonable assumption because that’s information out there but it’s wrong and I think it’s important because I get this a lot a lot of people say I’m gonna miss it but you’re not and that’s the you know I want to conclude with that and say you know delaying does not mean you lose out on the cost of living increases if you’re delaying from age 62 onward and I think it’s important for people to realize that one of the main
00:12:55
reasons why I love social security is because of the cost of living there’s three reasons why I love social security number one back by the government yep and number two it has a cost of living increase y right number three is it’s not all taxed we’ve done shows on taxation of Social Security but that second one the cost of living increases you don’t get that in most other income sources not even the raise most people don’t get an 88.7% raise no yeah love it right and so if
00:13:31
you delay you get that raise you get a higher percentage you get a higher cost of living on a higher amount compounding effect delaying Social Security is usually the thing to do most people don’t it’s not always the thing to do but here’s one of the reasons why you should consider delaying Social Security and so when you when I hear stuff like oh you don’t get the cost of living might as well take it I’m here to correct people and make sure they understand no you do even more reason to
00:14:00
want to delay so yep God bless Social Security God bless Social Security indeed so Tony again you were wrong I was right no I’m just kidding you know that’s why I’m here make word out it’s good to get if people are interested hey okay great now that I know that I still don’t know if I want to delay talk to me about it I have software I use this book over here Social Security um we have software that does the whole runs all the scenarios for you and says here’s why you should delay or not over 20,000
00:14:39
calculations your proprietary software the Social Security maximization report runs and there’s no cost for that it’s uh that is there’s no charge for the actual report um and that’s part of the initial consultation if people have questions right yep I get calls all the time if you want to call the number is going to come up on the screen dial extension 5 that’ll get the radio show Tony and I we get those messages so we hear from people that say Hey I want that report just call or go to the
00:15:11
website and ask for their social security report we’ll give it to you on top of that if you have a suggestion or a question for the show leave it on the voicemail yeah we love to hear from the listeners I love hearing the comments the guy who the guy who made the comment and said Dan’s great but that Tony guy why is he on there he’s nothing but noise I’ll never forget that I love shout out to him by the way hopefully he’s listening if he is God com below God bless you sir it’s got a lot of legs
00:15:41
that comment so I love it I think it’s awesome anyone that wants Social Security maximization report let us know we’ll get it to you I’m going put the um the contact information up next Tony thanks for a good show I’m picking on you but no that was really you know you had a 5050 chance and you missed it so maybe next time everyone see you next week all matters discussed in today’s show are for informational purposes only this shows not investment advice Dan nor dolphin Financial Group are affiliated
00:16:12
or endorsed by any government agency investment advisory services are offered through Dolphin Wealth Management Inc a registered investment adviser in the State of Florida Insurance products and services are offered through Dolphin Insurance Inc dolphin Wealth Management Inc and dolphin Insurance Inc are affiliated companies doing businesses as dolphin Financial Group you should talk to someone at Dolphin Financial Group before implementing any of these strategies or ideas