Dear Rusty: I’m still working right now, but everyone I talk to about Social Security seems to say that I should wait to take my benefit because once I start the amount will never go up. Problem is I really need the money now. Is it really true that once I claim the amount of my Social Security will never go up? Signed: Curious
Dear Curious: Well, there is a lot to be said for waiting as long as you can to take your benefits, not the least of which is that the longer you wait the larger your benefit amount will be. If you apply when you turn 62, you’ll only be getting about 74% of what you would get if you waited until your full retirement age (which for most people applying today is between 66 and 67). And for the most part, that is the benefit you will receive for the rest of your life, except in the following circumstances:
- Cost of Living Adjustments (COLAs) are calculated annually by Social Security according to a formula using the Consumer Price Index to determine the rate of inflation. If the result of that calculation calls for it, your benefit amount will increase by a small percentage to keep pace with the cost of living. While the COLA increases your benefit in most years, no cost of living adjustment occurred in 2009, 2010 and 2015 and the 2016 increase was a mere 0.3%. So your benefit amount will usually, but not always, increase as necessary for inflation.
- If you work while you’re collecting Social Security and you earn a significant salary, there is a chance your benefit amount could increase. That’s because of the way that Social Security determines your benefit amount in the first place, which is by taking your 35 highest-earning years to arrive at your Average Indexed Monthly Earnings, from which your benefit amount is calculated. If you have, within that 35 year window, years in which you had zero earnings, or very low earnings, your current earnings could replace one or more of those years causing your benefit to increase slightly.
- If you collect benefits and work before reaching your full retirement age and you exceed Social Security’s annual earnings limit, they will withhold some of your future benefits. But that doesn’t mean that you’ll lose those withheld benefits forever because, when you reach your full retirement age, they’ll recalculate your benefit amount to give you time credit for any months they withheld benefits because you earned more than the annual limit. That means that your benefit amount will go up a little when they do that recalculation.
- If you are collecting benefits on your own work record, and you have a spouse who is not yet collecting Social Security, it’s possible you may get a “spousal boost” when your spouse finally files for benefits. This would occur if the benefit you are entitled to as a spouse is higher than your benefit on your own record, which might be the case if your spouse is the higher-earning partner. The easy way to look at this is: if one-half of your spouse’s benefit at full retirement age is more than your current benefit from your own work record, you should contact your local Social Security office to ensure you get the maximum benefit you’re entitled to.
So, as you can see, the benefit amount you first get when you apply for Social Security isn’t fixed because you will usually get an annual COLA adjustment for inflation, and it may also increase if any of the fairly common circumstances described above apply to you. There are a couple of other less common circumstances which could apply for those grandfathered from changes made by the Bipartisan Budget Act of 2015, but those are outside the scope of this article. But, with the possible exception of a spousal boost, don’t expect any increase you might get to be very large.
The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at [email protected].