Social Security COLA - how is it applied?

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David Jay
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Social Security COLA - how is it applied?

Post by David Jay » Sat Oct 13, 2018 9:15 am

My spouse turns 62 in December. Her first SS check will be received in January [edit - or perhaps February?]. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Last edited by David Jay on Thu Oct 25, 2018 9:47 am, edited 1 time in total.
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pshonore
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Re: Social Security COLA - how is it applied?

Post by pshonore » Sat Oct 13, 2018 9:28 am

David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Is she eligible for a benefit for December? Unless she was born on Dec 1, I think she has to wait until January. But I do believe COLA is applied when you turn 62, so yes, I think she will get the COLA in February (with her January benefit figured at 62 plus 1 month)

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Mlm
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Re: Social Security COLA - how is it applied?

Post by Mlm » Sat Oct 13, 2018 10:29 am

Social Security benefits will increase by 2.8 percent beginning with the December 2018 benefits, which are payable in January 2019. See:
https://www.ssa.gov/oact/cola/latestCOLA.html

I would expect that her January check would include the COLA. The COLA is applied to everyone whether they decide to collect or not.

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HueyLD
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Re: Social Security COLA - how is it applied?

Post by HueyLD » Sat Oct 13, 2018 11:34 am

David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.

MIretired
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Re: Social Security COLA - how is it applied?

Post by MIretired » Sat Oct 13, 2018 5:03 pm

HueyLD wrote:
Sat Oct 13, 2018 11:34 am
David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.
+1 This post is all very descriptive.

ResearchMed
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Re: Social Security COLA - how is it applied?

Post by ResearchMed » Sat Oct 13, 2018 5:08 pm

HueyLD wrote:
Sat Oct 13, 2018 11:34 am
David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.
Only the PIA amount gets the COLA? So those who took the "age 70" max benefit won't see the COLA multiplier on their full amount each year?

RM
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MIretired
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Re: Social Security COLA - how is it applied?

Post by MIretired » Sat Oct 13, 2018 5:19 pm

ResearchMed wrote:
Sat Oct 13, 2018 5:08 pm
HueyLD wrote:
Sat Oct 13, 2018 11:34 am
David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.
Only the PIA amount gets the COLA? So those who took the "age 70" max benefit won't see the COLA multiplier on their full amount each year?

RM
It's not only the PIA amount gets COLA'd. It's the PIA amount gets COLA'd, and every benefit as it's percentage of the PIA amount adjusts likewise. eg: age 62 might be 75% of PIA; age 70 might be 132% of PIA (these are age 66full ret. age %s.)
Last edited by MIretired on Sat Oct 13, 2018 5:39 pm, edited 1 time in total.

ResearchMed
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Re: Social Security COLA - how is it applied?

Post by ResearchMed » Sat Oct 13, 2018 5:23 pm

MIretired wrote:
Sat Oct 13, 2018 5:19 pm
ResearchMed wrote:
Sat Oct 13, 2018 5:08 pm
HueyLD wrote:
Sat Oct 13, 2018 11:34 am
David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.
Only the PIA amount gets the COLA? So those who took the "age 70" max benefit won't see the COLA multiplier on their full amount each year?

RM
It's not only the PIA amount gets COLA'd. It's the PIA amount gets COLA'd, and every benefit as it's percentage of the PIA amount adjusts likewise. eg: age 62 might be 75% of PIA; age 70 might be 132% of PIA (these are age 65 full ret. age %s.)
Is this any different from applying the COLA directly to one's total benefit, regardless of whether it is 75% or 132% or whatever of the PIA?

RM
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MIretired
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Re: Social Security COLA - how is it applied?

Post by MIretired » Sat Oct 13, 2018 5:33 pm

ResearchMed wrote:
Sat Oct 13, 2018 5:23 pm
MIretired wrote:
Sat Oct 13, 2018 5:19 pm
ResearchMed wrote:
Sat Oct 13, 2018 5:08 pm
HueyLD wrote:
Sat Oct 13, 2018 11:34 am
David Jay wrote:
Sat Oct 13, 2018 9:15 am
My spouse turns 62 in December. Her first SS check will be received in January. Will it include the 2019 COLA because her birthday was in December? In this case her very first check would include the COLA.

I googled around and have not been able to find a description of the exact mechanics.
Unless she was born on Dec. 1 or 2, she is not considered to have been 62 yo for a full month in Dec.

if she was born after Dec. 2, her first ss payment will arrive in Feb. 2019 for her January benefit as ss benefits are paid in arrears. And the COLA should be reflected in her first payment.

Added: Also, Her PIA gets the cola, not her benefit. Since her benefit is a fraction of her PIA, her benefit (received or not) will also increase. Since benefits don’t get colas directly, and because of the round off rules, an increase of 2.8% in the PIA does not automatically translate to an exact 2.8% increase in her benefit.
Only the PIA amount gets the COLA? So those who took the "age 70" max benefit won't see the COLA multiplier on their full amount each year?

RM
It's not only the PIA amount gets COLA'd. It's the PIA amount gets COLA'd, and every benefit as it's percentage of the PIA amount adjusts likewise. eg: age 62 might be 75% of PIA; age 70 might be 132% of PIA (these are age 65 full ret. age %s.)
Is this any different from applying the COLA directly to one's total benefit, regardless of whether it is 75% or 132% or whatever of the PIA?

RM
Yes. But it's a more correct technicality. Everything spins off the PIA amount. -- If your FRA was 67, then your age 70 benefit is 124% of your PIA. If PIA COLA'd 2.8%, then so does your age 70 benefit.

The SSA is going to figure all PIA amounts 1st, and keep track of that number year in and out. Whether you've claimed benefits yet or not.

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Re: Social Security COLA - how is it applied?

Post by ObliviousInvestor » Sat Oct 13, 2018 6:19 pm

I have not been following this thread, but sscritic requested via email that I post the following:
sscritic wrote:Here is an example of the mechanics and how round off works:

old PIA 1987.1

Claim 11 months early. fraction is 845/900 or 169/180. Benefit is 1865.67, rounded down to the nearest dollar or 1865.

2.8% cola

new PIA = 2042.74, rounded down to 2042.70.
new benefit is 169/180 of 2042.7 or 1917.87, rounded down to 1917.

The new benefit is 2.788% more than the old, not 2.80%


second example:

old PIA 2123.4

Claim 11 months early. fraction is 845/900 or 169/180. Benefit is 1993.64, rounded down to the nearest dollar or 1993.

2.8% cola

new PIA = 2182.86, rounded down to 2182.80.
new benefit is 169/180 of 2182.8 or 2049.41, rounded down to 2049.

The new benefit is 2.81% more than the old, not 2.80%
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FactualFran
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Re: Social Security COLA - how is it applied?

Post by FactualFran » Mon Oct 15, 2018 3:29 pm

There are a number of details involved in calculating the Social Security Retirement benefit amount and COLAs to it. Avoiding some of the details, the benefit amount when starting at age 62 does not include a COLA. A COLA is applied at the end of later years.

The age 62 benefit amount depends on the Average Indexed Monthly Earnings, the Primary Insurance Amount calculated from it using bend points (so the benefit amount of lower-wage workers is a larger percentage of the wages they earned), and a reduction due to starting benefits before Full Retirement Age.

For details, see Appendix D: Computing a Retired-Worker Benefit of the Social Security Annual Statistical Supplement.

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David Jay
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Re: Social Security COLA - how is it applied?

Post by David Jay » Mon Oct 15, 2018 3:55 pm

My question was answered by the link that Fran posted as follows:

"For example, a worker who attained age 62 in 2014 would receive cost-of-living adjustments for the years 2014–2016. The adjustments are cumulative, with each step rounded to the next lower dime. If the PIA at age 62 was $700, the cost-of-living adjustments would be:

2014: $700 multiplied by 1.017 = $711.90

2015: $711.90 multiplied by 1.000 = $711.90

2016: $711.90 multiplied by 1.003 = $714.04"


So, using the same text, my wife turning 62 in (late) December, 2018 will receive the COLA for 2018.

This also, in effect, reduces the time without any inflation adjustment (AWI or COLA) to one year. She received the 2016 AWI and the 2018 COLA, only 2017 was uncovered by any adjustment.
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vested1
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Re: Social Security COLA - how is it applied?

Post by vested1 » Tue Oct 16, 2018 10:31 am

ObliviousInvestor wrote:
Sat Oct 13, 2018 6:19 pm
I have not been following this thread, but sscritic requested via email that I post the following:
sscritic wrote:Here is an example of the mechanics and how round off works:

old PIA 1987.1

Claim 11 months early. fraction is 845/900 or 169/180. Benefit is 1865.67, rounded down to the nearest dollar or 1865.

2.8% cola

new PIA = 2042.74, rounded down to 2042.70.
new benefit is 169/180 of 2042.7 or 1917.87, rounded down to 1917.

The new benefit is 2.788% more than the old, not 2.80%


second example:

old PIA 2123.4

Claim 11 months early. fraction is 845/900 or 169/180. Benefit is 1993.64, rounded down to the nearest dollar or 1993.

2.8% cola

new PIA = 2182.86, rounded down to 2182.80.
new benefit is 169/180 of 2182.8 or 2049.41, rounded down to 2049.

The new benefit is 2.81% more than the old, not 2.80%
Now if I can only get away with planting this virus in the system to divert all those fractions of a dollar into my account before Milton burns down the building!

FactualFran
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Re: Social Security COLA - how is it applied?

Post by FactualFran » Tue Oct 16, 2018 2:37 pm

David Jay wrote:
Mon Oct 15, 2018 3:55 pm
My question was answered by the link that Fran posted as follows:

"For example, a worker who attained age 62 in 2014 would receive cost-of-living adjustments for the years 2014–2016. The adjustments are cumulative, with each step rounded to the next lower dime. If the PIA at age 62 was $700, the cost-of-living adjustments would be:

2014: $700 multiplied by 1.017 = $711.90

2015: $711.90 multiplied by 1.000 = $711.90

2016: $711.90 multiplied by 1.003 = $714.04"


So, using the same text, my wife turning 62 in (late) December, 2018 will receive the COLA for 2018.
The web page with the quote was specifically about how the starting benefit amount depends on when the benefit is started. Someone who is eligible to start taking a benefit in 2018, but does not start taking the benefit until at least 2019 will have a 2019 benefit amount that includes the 2.8% COLA determined in 2018.

The COLA after starting the benefit likely involves additional details. Someone who started taking a benefit in 2018 would receive in 2019 the starting benefit adjusted by the COLA (ignoring details of the actual calculation). I don't know whether someone who turns age 62 in December and requests that the benefit starts at the earliest allowed date is considered to have started benefits in December or in following January. It may be the case that the benefit amount is considered to have started in January, in which case, that the first payment already includes the COLA.

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