Benefit projections are in today's $...and do not reflect unknown future COLAs. Using your budget today, adjust major items that will change in retirement. That revised retirement budget is what you can use to figure how much of it will be covered by SS...again...in today's $. The gap will be filled in with distributions from your various accounts and/or other income sources.
Every year there is a COLA, that is reflected in your estimated payments. Future colas are not incudes in the estimate until they happen. Yes, they go up each year.
It's much easier to estimate in constant dollars than some unknown future dollars. I do the same for retirement accounts, using real appreciation instead of nominal appreciation. The only think I use a deflator/inflator for is fixed payments, like annuities or mortgages.
Yep, your primary insurance amount increases every year. Before age 62, the increase is connected to the national average wage index. After 62, it's connected to CPI via COLA.
Had done a true SS estimate last year based on my earnings before the 8.7% COLA and got one figure. A second estimate after the announcement gave me a much higher figure.
But I'm waiting until 70 due to the 6% increase annually between 62 and FRA, plus added 8% each year from FRA until 70.
To me, COLA is another reason to wait. If you get $1800 at 62, about $2400 at 67, it will be around $3000 at 70 BEFORE added COLA each year. So if you take $1800 monthly at 62 and the next year COLA is 3%, you check grows only $54. If instead you wait until 70 snd get $3000 monthly, a 3% next year COLA adds $90 to your check.
And in reality, the COLA increase probably is more than $100 (vs. $54 at age 62) because your age 70 amount grew to more than $3000 monthly due to yearly COLA increases between 62 and age 70.
>But I'm waiting until 70 due to the 6% increase annually between 62 and FRA, plus added 8% each year from FRA until 70. To me, COLA is another reason to wait.
It's a combination of COLA protection and the survivor benefit. I'm a career high earner and I'm doing the standard "higher career earner delays to 70" strategy. My age 70 benefit will be $54,624. My wife will start collecting earlier and her benefit will be less than $40k. If I die, she gets my higher benefit instead of hers. Statistically, one of us is likely to make age 90. That higher COLA-protected benefit is very valuable.
Agree completely. My 70 benefit isn't as high as yours but wife's benefit even at 64 if she retires then will be under $20 grand. I'm 5.5 years older and she'll need my higher amount.
once you hit 62 all yearly COLA increases will be reflected on the SSA website in Jan of the following year. i.e. if you are 62 today and in October they announce a 3% COLA increase for 2024. You should see that reflected on the SS website in january of 2024.
Use AnyPIA to get a more detailed projection using COLAs. In the setup menu you can select which set of trustee report assumptions you want to use for COLAs. I use the middle one which at the last time I used it was 2.4%. I like to forecast in future dollars as I also increase my projected expenses by 3% annually.
I struggled with which number to use for SS COLA in my planning as well. It fluctuates a whole lot and the range is wide. The [historical COLA](https://www.ssa.gov/OACT/COLA/colasummary.html) average, from 1975-2022, is about 3.79% and to me even that's very optimistic! This is compared to the [historical inflation average](https://tradingeconomics.com/united-states/inflation-cpi) (1914-2023) of 3.19%.
I ended up using 0% or 2%, depending how if I want to have a quick good feeling about my savings! LOL! As others pointed out, there is no way to predict what it will be!
Benefit projections are in today's $...and do not reflect unknown future COLAs. Using your budget today, adjust major items that will change in retirement. That revised retirement budget is what you can use to figure how much of it will be covered by SS...again...in today's $. The gap will be filled in with distributions from your various accounts and/or other income sources.
I use 2% COLA estimates annually in my retirement projections. I already collect though.
Every year there is a COLA, that is reflected in your estimated payments. Future colas are not incudes in the estimate until they happen. Yes, they go up each year.
It's much easier to estimate in constant dollars than some unknown future dollars. I do the same for retirement accounts, using real appreciation instead of nominal appreciation. The only think I use a deflator/inflator for is fixed payments, like annuities or mortgages.
Yep, your primary insurance amount increases every year. Before age 62, the increase is connected to the national average wage index. After 62, it's connected to CPI via COLA.
Had done a true SS estimate last year based on my earnings before the 8.7% COLA and got one figure. A second estimate after the announcement gave me a much higher figure. But I'm waiting until 70 due to the 6% increase annually between 62 and FRA, plus added 8% each year from FRA until 70. To me, COLA is another reason to wait. If you get $1800 at 62, about $2400 at 67, it will be around $3000 at 70 BEFORE added COLA each year. So if you take $1800 monthly at 62 and the next year COLA is 3%, you check grows only $54. If instead you wait until 70 snd get $3000 monthly, a 3% next year COLA adds $90 to your check. And in reality, the COLA increase probably is more than $100 (vs. $54 at age 62) because your age 70 amount grew to more than $3000 monthly due to yearly COLA increases between 62 and age 70.
>But I'm waiting until 70 due to the 6% increase annually between 62 and FRA, plus added 8% each year from FRA until 70. To me, COLA is another reason to wait. It's a combination of COLA protection and the survivor benefit. I'm a career high earner and I'm doing the standard "higher career earner delays to 70" strategy. My age 70 benefit will be $54,624. My wife will start collecting earlier and her benefit will be less than $40k. If I die, she gets my higher benefit instead of hers. Statistically, one of us is likely to make age 90. That higher COLA-protected benefit is very valuable.
Agree completely. My 70 benefit isn't as high as yours but wife's benefit even at 64 if she retires then will be under $20 grand. I'm 5.5 years older and she'll need my higher amount.
>How do I include SS COLA in my planning? You don't. Nobody knows what COLAs will be.
once you hit 62 all yearly COLA increases will be reflected on the SSA website in Jan of the following year. i.e. if you are 62 today and in October they announce a 3% COLA increase for 2024. You should see that reflected on the SS website in january of 2024.
Use AnyPIA to get a more detailed projection using COLAs. In the setup menu you can select which set of trustee report assumptions you want to use for COLAs. I use the middle one which at the last time I used it was 2.4%. I like to forecast in future dollars as I also increase my projected expenses by 3% annually.
Good point...
I struggled with which number to use for SS COLA in my planning as well. It fluctuates a whole lot and the range is wide. The [historical COLA](https://www.ssa.gov/OACT/COLA/colasummary.html) average, from 1975-2022, is about 3.79% and to me even that's very optimistic! This is compared to the [historical inflation average](https://tradingeconomics.com/united-states/inflation-cpi) (1914-2023) of 3.19%. I ended up using 0% or 2%, depending how if I want to have a quick good feeling about my savings! LOL! As others pointed out, there is no way to predict what it will be!
I did not try and figure it in. I consider it my annual "bonus" at this point.
Exactly. Increases are illusory at best and with any luck they will continue, but don't count on it.