Ask Larry: Shouldn’t My Age 70 Benefit Estimate Increase With Each Year’s COLA?

Taxes

Today’s Social Security column addresses questions about how and when COLAs are applied, switching to spousal benefits after early retirement benefits and divorced survivor’s benefits before retirement benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.


Shouldn’t My Age 70 Benefit Estimate Increase With Each Year’s COLA?

Hi Larry, I am at full retirement age, 66 years and two months. I have not applied for my Social Security retirement benefit. It seems when I go to the Social Security site, my benefit estimate at 70 never increases.

Shouldn’t it increase with the COLA each year? Also, the calculator only shows my benefit increasing each half year. That is, the benefit at 67, or 67 and one month or 67 and two months is the same amount. It increases at 67 and six months. Why doesn’t the benefit increase each month? Thanks, Beverly

Hi Beverly, You’ll be credited with all Social Security COLAs that occur between now and when you turn 70 whether you wait to file or not. Social Security COLAs are credited to a person’s Social Security retirement benefit rate starting at 62 regardless of when they apply for benefits.

You’d also receive delayed retirement credits (DRCs) for each month that you don’t collect benefits starting with the month in which you reach full retirement age (FRA) and continuing through the month prior to the month in which you reach 70. The reason that DRCs aren’t reflected on some of the estimates you’re viewing is that DRCs are only added to benefit rates each January, and again at 70.

For example, if Tom filed for benefits in April 2021 when he reached 68, he would initially be credited only for the 21 DRCs he earned through December 2020. That would result in the same rate he’d have gotten if he’d filed in January 2021.

However, starting Tom’s benefit rate for January 2022, he’d have beeen credited with the additional three DRCs he earned for not drawing benefits for January through March 2021. So from then on, Tom’s monthly rate would be roughly 2% higher than it would be if he had started drawing in January 2021. Best, Larry


Am I Eligible To Switch To My Spousal Benefit?

Hi Larry, I have been taking Social Security retirement benefits since 62 and my husband filed at 65. I am now 75 and he is 74. Am I eligible to switch to my spousal benefits? Thanks, Diana

Hi Diana, You couldn’t actually switch from drawing your own benefits to drawing spousal benefits. Once you start drawing your own Social Security retirement benefits, those benefits continue for life.

But if you later become eligible for a higher benefit rate as a spouse or survivor, you can apply for an excess spousal or survivor benefit. If you qualify for excess spousal or survivor benefits, Social Security then pays you an additional, or partial, spousal or survivor rate in addition to your own benefit.

You can apply for an excess spousal benefit from your husband’s account, but you’ll only be eligible if 50% of his primary insurance amount (PIA) is higher than your own PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA). Best, Larry


Is It True That I Can Draw Divorced Survivor’s Benefits Now And Let My Own Retirement Benefit Build Until Full Retirement Age?

Hi Larry, I am collecting my Social Security retirement benefit at 62. When I applied, I was told I qualify to take divorced widow’s benefits and let my retirement benefit rate increase until my full retirement age . Was this true? The widow’s benefit is less than my retirement benefit but I want to wait till I’m 66 and switch. Thanks, Curtis

Hi Curtis, Yes, it’s true that if you’re potentially eligible for both your own Social Security retirement benefits and for survivor benefits, that you can choose to apply just for the survivor benefit and allow your own retirement benefit rate to keep growing. Your own Social Security retirement benefit amount will continue to increase until 70 if you choose to wait until then to switch to your own benefits.

It sounds like you may want to strongly consider waiting until then to make the switch. You can switch to your retirement benefits at any time, but if you start drawing your own benefits prior to 70, you’ll then be stuck with a permanent monthly benefit rate that’s lower than what you could have had.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry


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