Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

Social Security Sends Another Lesson On Why Delaying Is So Important

October 06, 2016 at 12:00 AM

Before the end of October, Social Security will announce the annual Cost of Living Adjustment (COLA) retirement beneficiaries will get for 2017. Or rather, what they won’t get. Because of the way the COLA is calculated the inflation adjustment is expected to be around 0.2%. Sadly, 0.2% will be better than the 2016 COLA: Zero.

That’s despite the fact that a standard inflation index, called CPI-U is up 1.1% over the past year and another CPI gauge-that removes the cost of food and energy-is up 2.3%. What gives? Well, Social Security uses a specific index, called CPI-W, that tends to lag the other indexes. Moreover, the annual COLA is calculated using the average for CPI-W in the third quarter of the year, and comparing it to the same quarter a year ago. 

Enough with the mechanics, here’s what really matters:  I know it is so frustrating for many senior citizens because their personal inflation rate likely hasn’t been zero over the past two years. The cost of medical care has increased about 4% annualized recently, and prescription drug costs are up more than 3%. And higher-income retirees have likely seen their Social Security benefit decrease, because they pay extra for Medicare Part B and Part D coverage, and those payments are typically deducted directly from their Social Security benefit. (This impacts individuals with modified adjusted gross income of $85,000 and married couples with income of more than $170,000.) 

I wish I had better news for current retirees. But I want to make sure that those of you near retirement learn from all of this. Because the annual inflation adjustment after you begin receiving benefits may not be as generous as you think, it makes it even more important to consider steps you can take to make sure you initially qualify for the largest possible benefit. And that means delaying when you start to receive your retirement benefit. 

You can begin to draw a Social Security retirement benefit when you turn 62. But if you are in good health and expect to live past your 70s I highly recommend aiming to delay starting your Social Security payout until you are age 70. That’s because every month that you delay, Social Security agrees to increase your eventual benefit. If you start at age 70 your benefit will be 76% higher than if you begin at age 62. There is no risk-free investment out there that will generate a 76% return over eight years. (For married couples, the goal is for the highest earner to delay as long as possible; the other spouse can begin collecting earlier if that’s needed.)

That doesn’t mean you must continue to work full time until age 70. You can retire earlier and rely on your savings, or a part-time job to generate the income you are not (yet) getting from Social Security. But if you expect Social Security to be a significant piece of your retirement strategy, waiting to collect the maximum benefit is smart. Especially in those years when the inflation adjustment is non-existent or tiny.

Tag Cloud

gift not loanverify wellness screening and programssave moneyBankretirement planRetirement Income20% equityFICO ScoreChanging Livesback door Roth IRAno private loanclosing feesForbes Top 10standard ratecalculate dependents annual income needscar buying mistakesmax benefit coveredis it necessary?juggle multiple financial goalsgrandparent IRA contribution 401(k) Contributionshousing marketBill and Pennydo you need life insuranceAccuQuote.comhealthy teethFinancial Power of Attorneybetter loan ratesaccelerate dental workFederal Funds RateGiftlet them have 50% controltitle insuranceMoney Marketinterest capitalizationStaffords this year have a fixed 6.8% interest ratepush yourself to save more for retirementautomatic paymentverify retirement plan with HR or plan sponsorderailed plantax refund fraudwould you decline a bonusborrowing plan unexpected expenseannual cost of living adjustmentlong term goalemergency fund responsible with moneyGay Rightsterm life insurancepay 100% cashbetter loan dealshome buying seasonbetter termsConventional loan PMIprovider of financial supportUS Tax Codecouple financesdebtEric Dodge do not pay allowance for good behaviortelevision host3 savings buckets Forbescommunity bankreplace permanent life insurance with termmortgage interest tax deductionopen enrollment review Influentialsno interestfile taxes quicklyonly offered while employed Telepicturesmax employer matched 401(k) contributionlife insurance name trust as beneficiaryStudent Loan15-year refinance dealdangerous money seasonbad retirement planningCredit scoredon't spend switch to spouse coveragecostly legal COLAdental insurance Federal PLUS loanMinor Children Mortgage Credit Availability Indexuniversal college accesssidelinedFICO at least 720retirment savingsExhibitionsecured cardprotect dependent staycationBeautyconfident of solutionnon conventional route!00% tuition paidhigh FICO scorehealthy aging social security not going brokeSelectQuote.comloan is giftSuze OrmanBankruptcydebit cardhome related tax break bonus iffy incomeTeachno apologybudgetteach importance of helping othersteenstaxesstudent loan repaymentworst financial mistakepay down student loan debtincrease emergency savingsloan big picture get health insuranceUrbana-Champaignreferrals public service career student loan repayment same-sex marriagePersonal Financehealthy retirement blood pressurebill paying prioritiesvalue moneyidentity theftraise your deductibleWillretirement accountsInterestinsurance yearly reviewHeartinitial tax break University of Illinoisexercise reguarlymobile appcredit reportspring summer Emergency Savingsonly refinance if it paysFederal ReserveLifestyle8 month safety net10 year repayment plan dear suze50 over 50Giftslower ratelow credit scoreETF'savoid burn outpaying for collegeage appropriate goalsAmy Lacyetlower premiumhome insuranceinsuranceSelfishARM Cautiondon't defer interest paymentsgay marriage ban end Florida adult childrenrent vs buyprotect your familyno life insurance financially irresponsiblecut monthly cable billUniversity of Floridanot gender specific comparison shoppingreduce withholdingCory Bookerwomen longer life spanMust Have Documents2016 adjust withholdingcontribute household expenses don't blow tax refundFICO credit score credit card mortgagepay more than minimumeight month living expense Durable Power of Attorney for Health Carefraudulent returnhigher insurance deductibleanticipated salarypay off debtworkaholicadjust allocations increased auto insurance premiummonthly dental insurance premiumborrow each year, capitalization is going to pile up protect and provide for minor child raise deductiblesget over life insurance phobialower mortgage interestyours, mine & ourssecure creditpaid in fullcompare monthly expensesHDHP/HSAcompare provider pricingHigh Credit Score40% toward financial goalno late fee Ashley Springercollege studentlousy investmentlong-term care premiumsrequired disclosurecost of capitalization calculatorhigher monthly paymentLTC shoppingno sneaking in feeslower overall drug costbad decisionssavings pleasuredangerous retirement planconsider roth 401(k)Veterinary Schoolget credit cardautomate student loan paymentsLTCStock InvestmentsIRA contribution gifted moneyFinancial Solutions For Youemergency fund savingsfull retirement agesuccesspoint cost offset by savingsorigination feesmax employee matchmake saving a pleasureloan no longer than 36monthsraise insurance deductibleno negativitysmall changes tax ID thefthealthy retirement weightThe Suze Orman Show8 Ruleskeep a schedulepreexisting condition not coveredfinancial argumentswrite new goalreduce monthly paymentsame sex marriage band end FloridaSave Us MoneyFinancial Awarenessback-to-school budgetface your financial fearmanage student loanskids schedule paymentsearn more on savingsmultiple lendersunsubsidized Stafford loandepreciating asset raising mortgage rates quick closingtake actionFRAmortgage disclosurehome ownershipFinancial Adviceallowancethree year car loanAdequate Auto and Home Insurancehealthy gumstraditional vs roth 401(k)one annual feeInvest for savings growthInflation Benefitemployer funding HSAgrandchild summer job IRA contributionsetup automatic savings withdrawpay high rate off firstRichHDHP's are good for you30 year mortgage Combo Insurance Productsearn allowancepositivelow-cost index mutual fundlower interest ratenew carCiti Simplicity Card marriage financial responsibilitycredit utilization raterising home pricesreduce interest rateescrowprotect loved ones term insurancehome buying budgetwomen live longerOne Wallet At A Timedon't derail retirement savingsInfluential CelebrityAARP Social security calculatorfinancial concernpay interest while in school19 years cash flow problempay down car loanFinal GoodbyePrime Rate Rise 2015pay credit debt ASAPjanuary billsCD'sSchool of Social Workcreate new truthadd teenCollege of Veterinary Medicinefocus on new truth paid vacationfinancial goal phrase2016 adjust estimated taxovercome financial fearsSuze approvedFHA loan feesgift grandchild IRA contributionnegotiate points with bank or sellerstudent loan repayment planhigh premiumsdon't use allowance as bribewaive home inspection bidincrease retirement savingslive below your meansdon't cover cosmetic dentistryAlarm ClockMoney-Savingallowance taskshorter payback periodhigh deductible health care planfamily save at least $100 monthlybreakdown projected monthly housing costdental savings planMass Mutualpercentage of women widowed 75-8415 year mortgagecredit unionSuze Orman Scholarshipresponsiblerolloverhome loan credit score below 740 near historic lowsstore credit cardshigh down paymentaffordabilityhome budget after tax costno waiting periodaffordable premiumteens and money3 bucket approachhigh credit score discountis it true? long term care3% debt transferred Warner Bros Television Groupdoctors in networksocial security never insolventStudent Debt Crisisstudent loan debtchildren under 18no fee transferemotional stakesEmployer Matched Contributionmoney-aware childinterest on student loansFinancialsummer job match income ultimate compounding giftcar leasingCommunication Skills Financial Cliffzero rate transfer dealscommitHigh FICO Score = Better RateSuze is my biggest mentorno tax on withdrawlsRevocable TrustAuto Savings death benefit 20 to 25 times annual incomeone credit cardOverspendingSandy Hook Promiseinsurance mistakesocial securityAmericans don't use all paid vacation timebuying car 2016contribution car loan4 Must Have Documents Foreclosurestudent loan repayment estimatorSuze changed my lifemaintain standard of livingclosing costs 2% of loan10% donate to charityfederal student loan deferment Financial Educatorvalentines dayschedule vacationbuying a cardon't extend mortgage studentadvice for college graduatespublic service loan forgiveness programemployer offered life insurancerequire chore in exchange for allowanceFree Debt Eliminatordon't buy wantspercentage men widowed 75-84credit cardno retirement funds for down paymentcharges on credit card20 year level term standard deduction Post-DivorceEasy Life Insurance be true to yourselffinancial fearsCNBCDeath Benefitreal estate mistakesritual scheduletoo expensive schoolis it kind?HDHP be kind to yourselfno splurge Financial Gift CliffHow To Build Creditmortgageignore 6 month grace period big results is it necessary8 month emergency fundSwap Older Annuities or Life Insurance enjoy saving Financial Awareness Video FestivalMarlo Thomas740 credit scoreleave a legacyCPI-Wcostly insurance mistakemortgage brokerRetirement Savings6 month waiting periodNew York LifeSuze Orman spouse Kathy Travisreal estate marketknow before you owefour steps to retirement savings repay student loanscnbc alarm clockFundsPBS Speciallearn good financial choices2015 record year car salesretirementco-sign low mileage discountstretch out haircut appointmentsclosing disclosureapproved medical 100% tax-freedon't ignore open enrollmentat worst still pay 75% benefitMoney20% down paymentHolidaynot enough life insuranceARMlong-term care refundchildren's bookFiscal Responsibilityraising interest ratesincrease retirement contribution ratepermanent life insurancecan you afford itpresident Obamastay positiveoverspend on dining outWall Streetlowest cost fund optionLong Term Care premiumsholiday spendingretain separate credit cardscut monthly cellular billlow down paymentalternative FICO scoreHoliday Seasonno private loansRevocable Living TrustLong Term Care Insurance Holiday ShoppingAARPloved ones dependent on incomemental healthdebt freeRoth 401(k)meet monthly switch to roth 401(k)graduationSatisfyingCredit Card Rate Increasephysical healthCommencementYoung Adult HSA tax savingsfinancing car 20% down payment avoid feespowerfulschool highest possible benefiteliminate credit card debtLTCi ASAPLegal Guardianrefinancecredit managementoverspend on giftsSandy Hook Elementary SchoolFinancial SystemPay Off Debt Before RetirementMotherStudent Debt401Ksocial workVital Documentsstrained relationshipmarriage inequalityGay Couplesdream schoolburn outgift up to 14,000home buying mistakesFederal Stafford loanbuy down Phyllis Shelton expert long-term careitemized deductionsave automatic withdraw to savings women long term careFixed Rate MortgageCivil Rightsproperty taxBaby Boomersfinancial independenceroth iraSpendinghealthy youpeace of minddoctor no longer in networkdon't charge a penny3 step financial road mapbest loan deal confidentPrime Rate Increaseletter to suzeprescription tierheartachebuy homeLoveteach your child good money habitsunder 18 financial giftSuze Orman's Money Warsspeak new goalwives should be involved in retirementshop online guaranteed level term policydental discount plancommunity collegeHDHP'sGracedon't do five year car loanalways use all paid time offmonthly benefit death benefit needs for familylife insuranceMost Influential Celebrities Listsavingspremiumbuy home you can affordincentives for health care wellness screeningidentity fraudbecome member Goodbyebest interest ratesHDHP's are not badNew american Dream plan20 to 25 times annual incomeCredit Card Interest Rateage appropriate chorefile asap2015 financial roadmapfinancial aidoverspend on nights outspecial saving accountget the most out of social security women outlive menkid borrow firstmoney vowsfocus on needsbe good exampleloan necessityJose Rodriguez2017 Taxescollege graduatepurely financial standpointWashingtonshort term goal balance transfer NewtownLong Term Care shopping


View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel