Why Experts Say 2027 COLA Shouldn't Factor Into Your Social Security Strategy
With the 2027 cost-of-living adjustment set to be announced Oct. 14, some people nearing retirement wonder whether waiting to claim will lock in a bigger raise. The experts, however, have answered with a resounding "no."
"I would not make a Social Security claiming decision based on the COLA," said Will Allen, CRPC, founder and financial advisor at Sentara Capital, who taught Social Security classes at companies in metro Atlanta for several years.
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A bigger cost-of-living adjustment might sound like a reason to delay claiming Social Security, but the math isn't that simple. Experts say other considerations can matter far more when deciding when to file.
You Already Get the COLA Before You Claim
COLAs start counting toward your benefit once you're eligible, and that's whether you've filed or not.
"Cost-of-living adjustments are credited to your benefit starting at age 62 whether or not you have filed, so delaying for COLA alone gains nothing," said Hans Goldstein, founder of the Retirement Literacy Foundation, a nonprofit that runs free retirement workshops.
Allen made the same point. Someone who turns 62 in 2027 and waits until 70 to claim still picks up every annual COLA along the way.
The Real Reason To Wait
Delaying can still pay off, but for a different reason. Each year you wait past full retirement age adds about 8% to your benefit until age 70 — that boost is separate from the COLA and stacks on top of it.
For someone with a full retirement age of 67, waiting until 70 means a benefit roughly 24% larger for life. A $2,000 monthly benefit at 67 would grow to about $2,480 at 70, before any COLAs get added.
Goldstein's advice was to delay only for that reason (and only when the numbers work). After all, he said, those delayed retirement credits amount to about 8% a year between full retirement age and 70, so the decision to wait would make sense as long as you were confident in your ability to comfortably cover the gap from savings.
What Should Drive the Decision
When Allen helps clients choose a claiming age, the COLA isn't on the list of considerations. Instead, he looks at how much monthly income they need, what other investments they have, their current health, whether they have other income and how Social Security fits into the rest of their retirement plan.
Someone in good health with enough savings to cover a few extra years may come out ahead by waiting. A retiree who needs the income now or who has health concerns, however, may be better off claiming earlier regardless of when the next raise arrives.
Mark Oct. 14 Anyway
The 2027 COLA announcement is still worth watching, as it still affects what every beneficiary takes home next year. Just don't let it set the date you file.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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