Retirees Who Delay Social Security Get 1 Hidden Advantage

Key Points

If you hold off on claiming Social Security past full retirement age, your monthly benefits get a large boost.

That's not the only financial benefit of waiting.

There's another perk that could make a huge difference throughout your retirement.

• The $23,760 Social Security bonus most retirees completely overlook ›

There's a reason financial experts often encourage retirees to delay claiming Social Security if they can afford to wait. Waiting to file for benefits could boost your monthly checks for life.

You can claim Social Security at any age once you turn 62. If you wait until full retirement age, which is 67 if you were born in 1960 or later, you'll get your monthly benefits without a reduction.

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However, if you delay Social Security past full retirement age, your benefits get boosted 8% for every year you wait, until you turn 70. That boost then stays in effect for the rest of your life.

But a larger monthly check isn't the only upside of waiting. There's another key perk that many retirees overlook.

Bigger Social Security checks lead to larger COLAs

Each year, Social Security benefits are eligible for a cost-of-living adjustment, or COLA. The purpose of COLAs is to help benefits keep up with inflation.

But COLAs aren't flat dollar amounts. Rather, they're percentage-based. This year, for example, Social Security benefits rose 2.8%.

What this means is that the larger your monthly benefits are to begin with, the more valuable every single COLA that comes through should be for you. So if you delay Social Security, you can set yourself up with not just larger benefits, but larger raises from year to year.

For example, say you're entitled to $2,000 a month in Social Security at 67. If you wait until age 70 to file for benefits, you'll get $2,480 a month instead.

Now, let's say there's a 3% COLA the following year. For a $2,000 benefit, you're looking at a $60 raise. For a $2,480 benefit, you're looking at an extra $74.40.

That gap may not sound like much initially. But over time, larger COLAs could help your financial situation immensely.

Lock in that stronger inflation protection

The value of larger Social Security COLAs can become more evident during periods of rampant inflation. While current inflation levels aren't dreadful, a few years back, they were huge.

Larger COLAs could give you more spending leeway during times when costs are rising rapidly. So it pays to consider this peripheral benefit of delaying your Social Security claim.

Of course, delaying Social Security isn't right for everyone. If you have health issues that are likely to shorten your lifespan, an earlier claim could be a better financial choice. If you're unable to work and need money, you may not be able to wait until 70 to sign up for Social Security.

But if you have the option to wait and it makes sense for your financial situation, the combination of larger monthly checks and bigger lifetime COLAs could give you a serious long-term advantage.

The $23,760 Social Security bonus most retirees completely overlook

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