Congratulations, Social Security recipients: You’re getting a raise! The 5.9% raise that Social Security will see in 2022 will be the largest one seen in decades, and much better than the 1.3% raise we saw in 2021… But before you get too excited, it’s important to keep inflation in mind. These days, we’re paying more on everything from gasoline to groceries — a lot more. According to October data from the Consumer Price Index, the price of consumer goods are up 6.2% over this time last year.
After COLA (cost of living adjustment) kicks in in January, the average monthly Social Security benefit for all retired workers will be $1,657. That’s an additional $92 a month versus 2021’s average payout. The new increased payments will roll out to more than 64 million Social Security beneficiaries starting in January.
The right claiming strategy is worth an extra $100 – $200 a month
Clearly cost of living adjustments aren’t going to dramatically pad your income in retirement, and inflation is a very real worry for retirees who are trying to cover the same exact expenses they were last year, all of which are now more expensive. But if you are a near-retiree — or even years away from leaving the daily grind — there’s a much more rewarding way to give yourself a healthier raise: Be very strategic about when you file for Social Security benefits.
Filing for benefits too early could permanently reduce your monthly income by as much as 30%.
The key is to not file too early. Once you reach “full retirement age” (which is around 67 if you’re born in 1960 or later), you become eligible for unreduced Social Security benefits. But… every year you delay filing for benefits beyond your full retirement age will increase your monthly benefit by 8% a year.
Based on the averages above, that means getting $1,666 a month payout instead of $1,543. For couples both receiving benefits, it means an extra $207.
The impact is even greater if you’re considering early retirement and claiming benefits by age 62 instead of your full retirement age. In that case you could permanently give up as much as 30% a month in income.
Why this is especially important for women
Ladies, Social Security math is especially important for you, since women tend to live longer and therefore will rely more heavily on Social Security in the later years.
The proportion of women among retired-worker beneficiaries quadrupled between 1940 and 2020, according to SSA data. In 2020, 55% of Social Security beneficiaries were women, with nearly 70% of them receiving worker benefits based on their earnings and 12% receiving survivor benefits.
You know all those gender-based “gaps” we talk about — the wage gap, the mom gap, the widow gap and the care gap? All of those financial gaps impact women and how much we get in Social Security earnings.
Start running the numbers right now and find out exactly how much you’re projected to earn by setting up a personal Social Security account at My Social Security.
More on Social Security Benefits from HerMoney:
- What You Don’t Know About Social Security Can Cost You — a Ton
- HerMoney Podcast: Everything Women Need To Know About Social Security
- Tempted To File Early For Social Security? Don’t Do It Before Considering These Six Things
SUBSCRIBE: Own your money, own your life. Subscribe to HerMoney to get the latest money news and tips!