I recently contacted SSA to determine my deferred age 70 benefits. The value I was given was different than the spreadsheet I had generated. So what was different? Referencing the example below, assume the FRA is $2,400, and it includes the 2013 1.7% COLA.
The first benefit values below show the age 70 SS benefit if the COLA and 8% bump-up are applied yearly so that one gets the full yearly benefit of the compounding for both the COLA and the 8% bump-up. This is how I calculate the age 70 benefit, and what makes sense to me.
The next benefit values show the age 70 SS benefit if either all the COLAs are applied first, and then the 8% yearly bump-ups, or vice versa. In either case, the age 70 benefit is identical. This is how the SSA calculates the age 70 benefit.
The way SSA calculates the benefit understates the monthly benefit by $100.61 or $1,207.31 yearly. Not a minor difference.
Does anyone know whether the way the age 70 benefits are calculated is codified anywhere? I've tried google, but found nothing.
Am I, as all, just stuck with how the SSA does their calculation, or?
Thanks
Yearly Social Security Bump-Up - 8%
Yearly COLAs
2014 1.50%
2015 1.70%
2016 0.00%
2017 0.30%
SS Benefit w/ Compounding Both COLA and 8% Bump-UP Yearly
2013 $2,400.00
2014 $2,630.88
2015 $2,889.65
2016 $3,120.83
2017 $3,380.60
SS Benefit w/ Applying All COLAs , Then All Bump-ups:
$2,484.84 <- First apply COLA's
$3,279.99 <- Then bump-ups
Or vice versa
$3,168.00 <- First apply bump-ups
$3,279.99 <- Then COLOAs
Difference between the SSA calculations and month $100.61/month, or $1,207.31/year.
Age 70 Social Security Benefits - 2 different answers
- dodecahedron
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Re: Age 70 Social Security Benefits - 2 different answers
Edited my previous response because I realized I had misinterpreted the situation.
Interesting puzzle.
Interesting puzzle.
Re: Age 70 Social Security Benefits - 2 different answers
Delayed retirement benefits do not compound. The benefit is 8% of the benefit at FRA per year, or to be more exact, it is 2/3 of 1% of the FRA benefit for each month you delay.
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Re: Age 70 Social Security Benefits - 2 different answers
Right.earlyout wrote:Delayed retirement benefits do not compound. The benefit is 8% of the benefit at FRA per year, or to be more exact, it is 2/3 of 1% of the FRA benefit for each month you delay.
The COLAs, however, do compound...
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Re: Age 70 Social Security Benefits - 2 different answers
This is the way I understand it.
Everything is calculated based off your FRA benefit. First apply the COLA to the FRA benefit to get the COLA Adjusted FRA Benefit. Delayed Retirement Credits (DRCs) are then calculated at the rate of 8% of the COLA Adjusted FRA Benefit per year beyond FRA (or 2/3 of 1% per month beyond FRA). To calculate the DRC Adjustment, take the number of years (or months) past FRA times 8% of the COLA Adjusted FRA Benefit. Then add the DRC Adjustment and the COLA Adjusted FRA Benefit to get the Delayed Benefit.
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COLA Adjusted #yrs 8% DRC applied DRC Adjustment Delayed
Year Age COLA (%) FRA Ben to COLA FRA Ben to COLA FRA Ben Benefit (D+F)
2013 66 n/a $2,400.00 0 … $2,400.00
2014 67 1.5 $2,436.00 1 $194.88 $2,630.88
2015 68 1.7 $2,477.41 2 $396.39 $2,873.80
2016 69 0.0 $2,477.41 3 $594.58 $3,071.99
2017 70 0.3 $2,484.84 4 $795.15 $3,279.99
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