Ask Larry

How does the COLA affective my maximum SS benefit? I am past my FRA but I have not started to collect my social security, my advisor recommended I wait until
I turn 70 when I would get the largest benefit available to me. But, my question is since I am not currently collecting SS do i even benefit from the COLA? I know that your SS benefit goes up about 8'% a year every year past FRA, so will my benefit for this year calculation go up 8% plus the 2022 COLA which is rumored to be around 9%? Or is the COLA only distributed to those folks currently enrolled and collecting their SS benefit? For everyone else you don't get anything from the COLA. Thank you

Hi. A person's primary insurance amount (PIA) is increased by all Social Security COLAs that occur after they turn age 62 regardless of when they start drawing benefits. A person's PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA). Delayed retirement credits (DRC) are added to a person's primary insurance amount (PIA) for each month that they delay collecting Social Security benefits past their full retirement age (FRA).

In other words, COLAs are first added to a person's PIA, and then any DRCs involved are added to the updated PIA.
For example, let's say Bob's FRA is 66 and his PIA at the time he turns age 62 is $1700. Bob decides to wait until age 70 to start collecting his benefits. By the time Bob reaches age 70, COLAs have increased his PIA to $2000. Bob is also eligible for 4 years of DRCs, adding 32% to his benefit rate. Thus, Bob's benefit amount at age 70 is $2640 (i.e. $2000 x 1.32).

Best, Jerry