Inflation may give your Social Security benefits a significant bump next year. The annual cost-of-living adjustment (COLA) is expected to jump to between 3.9% and 4.2% in 2027 according to forecasts released after government data showed a rise in inflation.
The COLA is typically announced in October, so we’ll have to wait a few more months for the actual figure. But the COLA isn’t the only number that determines how much you receive in benefits. Here are five rules that determine how much you get.
1. The earnings test disappears at full retirement age
If you claim your Social Security benefits before your full retirement age (66 or 67, depending on when you were born) and continue working and earning above a certain threshold, you’ll be subjected to the Social Security Administration’s (SSA) earnings test. The test temporarily lowers your benefits before you reach full retirement age, but then you get money added to your benefits once you reach full retirement age.
This idea behind the rule is to postpone some of your benefits so you can get them during a time when you’re no longer earning an income through work. The earnings test doesn’t apply once you reach full retirement age.
2. You can pause and restart benefits to grow them
Most people know they can become claiming Social Security at 62, but you may not know that you can pause your benefits once you reach full retirement age. If you do so, your benefits will increase by up to 8% per year, plus inflation. They’ll restart at age 70, though you can restart them before that, too.
This strategy can work well for people who decide to return to work after claiming Social Security or prefer to use their nest egg as a financial bridge that covers living expenses for a few years, letting their benefits grow undisturbed.
3. Divorced? You may qualify for a spousal benefit
If you are divorced after being married for at least 10 consecutive years and are currently unmarried, you may qualify for up to 50% of your ex-spouse’s full retirement benefit. Claiming this benefit does not impact how much your ex-spouse earns from Social Security, and you can even claim it if your ex-spouse has remarried.
Divorced retirees who didn’t earn high incomes can benefit from this rule if their ex-spouse was a high earner.
4. You can withdraw your claim once and start over
Some people immediately regret tapping into Social Security early.
Luckily, the Social Security Administration offers a one-time “do-over.” Within 12 months of filing, you can withdraw your application, repay all benefits received and restart later. That way, you end up with higher Social Security checks when you decide to claim your benefits in the future.
5. COLAs still apply if you wait
Cost-of-living adjustments (COLAs) will increase your Social Security payouts regardless of whether you claim them right away, suspend benefits after full retirement age or wait until you turn 70 to tap into the program. Retirees aren’t missing out on inflation protection while waiting, and waiting can result in a much higher lifetime benefit.
