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Yahoo
2 days ago
- Business
- Yahoo
This Little-Known Social Security Rule Could Boost Your Monthly Check Up to 26.7%, Even if You're Already Collecting Benefits
Many seniors feel the buying power of Social Security has declined over the years. If you want the maximum possible benefit you're eligible to receive, you need to delay claiming until age 70. Many who claimed earlier can still boost their benefits by taking advantage of this little-known rule. The $23,760 Social Security bonus most retirees completely overlook › The average retiree collecting Social Security receives about $2,000 per month from the government program. And while that number has gone up significantly over the last few years as a result of the annual cost-of-living adjustment, or COLA, many seniors feel their Social Security checks still don't go as far as they used to. The Senior Citizens League estimates someone who received Social Security back in 2010 now has 20% less buying power from their monthly benefits compared to 15 years ago. As such, it's natural for seniors to look for ways to get more out of Social Security. While there are several ways you could receive a bump in benefits, only a few of them are in your control. One of the easiest ways to increase your benefit takes advantage of a little-known rule that could boost your monthly check up to 26.7%. Here's what Social Security recipients need to know. Before we dive into how to increase your Social Security check, it's important to understand how the government calculates it. There are only three factors that go into determining the size of your benefit: How much you earned during your career When you were born When you claim benefits When you apply for Social Security, the government takes a look at your past earnings from every year of your career. It adjusts each years' earnings for inflation, indexed to the year you turned 60. Any earnings after age 60 don't get an inflation adjustment. It then selects the 35 highest years of adjusted earnings from your career and calculates the monthly average earnings from that sample. The resulting number gets plugged into the Social Security benefits formula to determine your primary insurance amount. Your primary insurance amount, or PIA, is the amount of Social Security you're eligible to receive if you apply for benefits the exact month you reach full retirement age. That age is determined by when you were born. If you were born between 1943 and 1954, you reached full retirement age at 66. The age increases by 2 months for each year you were born after 1954 until maxing out at age 67 for anyone born in 1960 or later. The last factor that determines your monthly benefit is when you decide to claim. If you claim Social Security before you reach full retirement age, you'll receive less than your PIA. If you wait, you'll see an increase in your monthly benefit up until age 70. To be precise, each month you delay Social Security beyond your full retirement age increases your monthly benefit by 2/3 of a percentage point of your PIA. So, someone born in 1958 with a full retirement age of 66 and 8 months could delay for 40 months for a 26.7% boost to their benefit. If you claimed your benefits early, there's good news. You can still get that boost of up to 26.7% on top of your current benefit. You just have to take advantage of this one rule. If you've already claimed Social Security, you can opt to suspend your benefits upon reaching full retirement age. If you've already reached the threshold age but remain younger than 70, you can suspend benefits starting next month. Doing so will allow you to start accruing credits that will increase your monthly benefit amount once you resume collecting it. Benefits will automatically resume starting at age 70 if you haven't restarted them already. Someone born in late 1958 still has time to apply to suspend benefits the month they reach full retirement age and increase their monthly check by the maximum 26.7%. Note, you'll still see the annual COLA adjustment while benefits are suspended, so the actual increase will be even greater. Of course, there are some significant drawbacks to this strategy. First and foremost, it means going without your monthly Social Security check for several years. If you aren't in a position where you can forego benefits today in exchange for a bigger benefit later, then it's probably not worth the financial maneuvering required to take advantage of the option. However, if you can do without, the guaranteed return from suspending benefits is very appealing. Second, if someone else is collecting benefits based on your earnings record, they'll no longer be eligible for those benefits. If your spouse is taking spousal benefits or your child is eligible through you, they'll see their benefits disappear or revert to any other smaller benefit they're eligible for. That could negatively impact your household income for the time being, but in many cases it's worth it in the long run. Lastly, if you're enrolled in Medicare Part B, the Social Security Administration automatically deducts your premiums from your monthly benefit. Be sure you can afford to pay those premiums out of pocket before you suspend Social Security. If you can manage those challenges, though, opting to suspend benefits could be worth it. You can request a suspension by phone, in writing, or in person at your local Social Security office. The suspension begins the month after your request is accepted. So, if you're fast approaching full retirement age, it's time to get things in order if you think suspending benefits and boosting your monthly payment is right for you. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. This Little-Known Social Security Rule Could Boost Your Monthly Check Up to 26.7%, Even if You're Already Collecting Benefits was originally published by The Motley Fool
Yahoo
14-05-2025
- Business
- Yahoo
Inflation Is Cooling Off. Does This Mean a Lower Social Security COLA in 2026?
Inflation data for April came in lower than experts had projected. The latest estimate calls for a 2.3% COLA in 2026. There's a chance that cooler-than-expected inflation could lower the COLA even more. The $22,924 Social Security bonus most retirees completely overlook › If you haven't seen the latest inflation data, the general idea is that prices are rising more slowly than expected. We recently got a look at consumer price index (CPI) data for April, and the year-over-year inflation rate was 2.3%. Not only is this the lowest inflation figure since early 2021, but it was one-tenth of a percentage point lower than economists had expected. The core CPI, which excludes food and energy prices, matched annual estimates with a 2.8% increase, but the monthly rise was lower than expected. This is a little lower than the latest projection for the 2026 Social Security cost-of-living adjustment, or COLA, from the Senior Citizens League (not a government organization). Its latest estimate calls for a 2.4% COLA next year, which is slightly less than the 2.5% seniors received in 2025. But if inflation has been declining so far in 2025, couldn't the trend continue? With the Social Security COLA based solely on third-quarter inflation data, a continued decline in inflation could certainly have COLA implications. However, just because inflation was cooler than expected in April doesn't mean the trend will continue. Here's why many experts don't expect the low inflation to last, and what it could potentially mean for the 2026 COLA. As mentioned, the Social Security COLA uses third-quarter inflation data each year to determine the effect of inflation. The Social Security Administration looks at CPI data (specifically the CPI-W) from July, August, and September, and compares it with the same period from the prior year. The increase in the CPI-W is rounded to the nearest tenth of a percent, and that becomes the COLA. One important point to keep in mind is that April's consumer price index data included some of the effects of President Donald Trump's tariffs, but not much. There were a few notable effects, such as a rather large 9% jump in the prices of audio equipment. Several prominent economists believe that we haven't yet seen the majority of the effect from the tariffs in the inflation data. In a CNBC interview, Moody's chief economist Mark Zandi said he expects to see a noticeable effect from tariffs in the May inflation data that we should get midway through June. Another economist from the Peterson Institute for International Economics estimates that a 10% average tariff rate could add as much as 1% to the CPI "after about six to nine months." Wells Fargo senior economist Sarah House said: "I think tariffs are the biggest question mark over the inflation outlook." Because it's based on third-quarter inflation, it's impossible to predict the 2026 COLA with any degree of accuracy. Because of the ongoing tariff back-and-forth, as well as a generally slowing U.S. economy, the inflation rate on the back end of the year is more uncertain than it usually is. Essentially, the 2026 COLA is going to depend on just how much of an effect we actually end up seeing from tariffs. There are two key questions: What will the tariffs be when the dust settles, and how much inflationary pressure will the implemented tariffs put on inflation? If the trade war intensifies sharply and tariffs end up higher than expected, it could result in a spike in inflation and make the COLA significantly higher than the latest projection indicates. On the other hand, if tariffs end up essentially being quickly negotiated away and/or become a non-event for inflation data, it's entirely possible that inflation could continue to fall during the rest of 2025. The most likely outcome is somewhere in the middle of those two extremes -- but where in the middle is anyone's guess at this point. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Inflation Is Cooling Off. Does This Mean a Lower Social Security COLA in 2026? was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
04-05-2025
- Business
- Yahoo
Social Security's 2026 Cost-of-Living Adjustment (COLA) May Surprise Retirees for This Reason
Due to cooling inflation, many people are anticipating a relatively small cost-of-living adjustment (COLA) for Social Security in 2026. Tariffs could consumer prices upward, leading to higher levels of inflation. If inflation picks up, it will result in a larger COLA -- but seniors may not come out ahead financially. When the Social Security Administration announced this past October that retirees would be getting a 2.5% cost-of-living adjustment (COLA), many seniors were disappointed. And that was understandable. A 2.5% raise isn't particularly generous, especially in light of recent Social Security COLAs that have been far more robust. Meanwhile, inflation has cooled modestly since the start of 2025. And that's a good thing in theory. The problem, though, is that it could lead to an even smaller Social Security COLA in 2026 than what seniors got at the start of 2025. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » It's too soon to predict what 2026's Social Security COLA will look like. That's because COLAs are specifically based on third-quarter inflation data. But based on whatever data is available so far, the Senior Citizens League, a nonpartisan advocacy group, had made a prediction about next year's COLA. And as of early April, it was calling for a 2.3% boost to Social Security benefits in 2026. Clearly, that's not great news for anyone hoping for a larger raise. But that 2.3% estimate may not be all that accurate for one big reason. The Trump administration is implementing tariff policies in 2025. It's still unclear as to exactly what those will look like. But many experts are certain that tariffs will drive consumer prices upward. If that's the case, inflation could reverse course during the second half of 2025. And if there's a huge uptick during the third quarter of the year in particular, it could lead to a much larger Social Security COLA than 2.3%. But is that a good thing? Not really. The problem with Social Security COLAs is that generous ones come at the cost of higher price increases. So all told, beneficiaries really can't win. The best they can generally hope for is a break-even scenario, where their COLAs do the job of allowing them to maintain buying power from year to year. A larger COLA in 2026 could help Social Security beneficiaries stretch their monthly benefits in the face of tariffs. But there's the very real risk that tariffs will strain seniors' budgets and make it harder for those who are already struggling to make ends meet. The Senior Citizens League warns that tariffs have the potential to drive drug prices upward for seniors. As it is, many retirees have a hard time affording their medication. But import taxes could impact hundreds of drug products from trade partners. Plus, tariffs could easily drive up the cost of food, whether by making imports more expensive or by forcing more domestic production that comes at a higher price tag. So either way, seniors on Social Security need to brace for what's to come -- and, when possible, find ways to boost their income outside of any COLA that comes down the pike. That could mean working part-time or joining the gig economy for extra cash. Of course, it's too soon to predict exactly how tariffs will affect the economy, just as it's too soon to predict exactly what 2026's Social Security COLA will look like. But retirees should know that while next year's COLA might end up coming in higher than expected, that outcome won't necessarily be one to celebrate. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security's 2026 Cost-of-Living Adjustment (COLA) May Surprise Retirees for This Reason was originally published by The Motley Fool
Yahoo
01-05-2025
- Business
- Yahoo
These Retirees Risk Losing Some of Their Social Security Check in 2026
Retirees are expected to receive a cost-of-living adjustment in 2026. With an increase in income, more retirees could lose some of their benefits to the IRS. More retirees risk being taxed each year because the threshold at which taxes kick in does not increase due to inflation. Many retirees rely on their Social Security checks to help them cover the bills. That's why it's so important to know of any upcoming changes that could affect the amount of benefits you get to bring home. For some retirees, a change will come in 2026 that could leave them with less of their benefits to spend. Here's what the potential change is, why it is an issue, and who needs to plan for it. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Retirees are at risk of losing some of their Social Security benefits next year, depending on where their income is relative to the threshold at which benefits become taxable. Under federal law, retirees pay taxes on their benefits once their income exceeds a specific amount. For married joint filers, up to 50% of their benefit can be taxed by the IRS once their provisional income hits $32,000. If their provisional income goes above $44,000, up to 85% of benefits could be subject to tax. For single tax filers, up to 50% of benefits could be taxed once provisional income hits $25,000. If it goes above $34,000, up to 85% of benefits could be taxed. Provisional income is half of all Social Security benefits plus all taxable income and some non-taxable income, like MUNI bond interest. Unfortunately, the number of retirees who exceed these thresholds will rise next year. This will happen because retirees are on track to get a cost-of-living adjustment (COLA) next year. COLAs cause benefits to increase so that retiree benefits keep up with the rate of inflation. COLAs are not a raise, because they don't provide more buying power -- but they give seniors more money in their checks. The problem is, the threshold at which benefits become taxable is not indexed to inflation. This means some retirees will get more money, so they will cross that threshold and lose some of it to the IRS. The raise that was supposed to give them more buying power will cause them to be taxed more, leaving them in a worse position. Social Security benefits first became subject to tax as a result of reforms in 1983. At the time, fewer than 10% of retirees were taxed on benefits. However, because the thresholds for taxation of benefits haven't changed, the number is now around 50% and growing. What's more, the Senior Citizens League found that households affected by this tax now pay an average of $3,211 to the IRS. The large COLAs in recent years only exacerbated this issue, as seniors saw their checks rise substantially but didn't gain buying power due to surging inflation. With retirees projected to get another benefits bump next year, the trend of more seniors losing money to taxes will continue. This may not be an issue if President Donald Trump follows through on his pledge to eliminate tax on Social Security, but the future of this plan is unclear and, unless the law changes, retirees who are close to the threshold amounts will need to prepare to send money to the IRS next year instead of spending it on the things they may want or need. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. These Retirees Risk Losing Some of Their Social Security Check in 2026 was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
27-04-2025
- Business
- Yahoo
Social Security COLA Forecast: Here's the Good and Bad News for Retirees
Believe it or not, retirees are less than six months away from finding out how much their Social Security benefits will increase next year. But you don't have to wait to learn what the annual cost-of-living adjustment (COLA) is expected to be. The Senior Citizens League (TSCL), a nonprofit organization that advocates for seniors, updates its Social Security COLA forecast each month. The organization's latest prediction is out -- and there's good news and bad news for retirees. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Let's start with the good news: Retirees can expect a Social Security benefits increase of 2.3% in 2026 based on TSCL's latest projection. That's lower than the 2.5% adjustments received in 2025. You might be wondering, "Why is a lower COLA good news instead of bad news?" To answer that question, we have to understand how the annual COLA is calculated. The Social Security Administration (SSA) uses an inflation metric called the Consumer Price Index for Urban Wage Earnings and Clerical Workers (CPI-W) to determine what the annual COLA will be. In particular, the agency measures the percentage increase (if any) between the average CPI-W for the third quarter of the current year and the average CPI-W for the third quarter of the previous year. One downside to using the CPI-W is that it doesn't always accurately reflect the price increases experienced by seniors. For example, the inflation metric doesn't weight healthcare costs as highly as they impact seniors' budgets. Another drawback to the annual Social Security COLA (regardless of which inflation metric is used) is its timing. Retirees don't receive a benefits increase until after they've paid higher prices for products and services. Because of these issues, the ideal COLA would be 0%. This would mean that retirees wouldn't be at risk of losing any buying power with their Social Security benefits due to inflation. Now for the bad news: The actual Social Security COLA will likely be higher than TSCL's latest forecast of 2.3%. There's a simple explanation why. As you might expect, the CPI-W is one of the key indicators TSCL uses in its model to project the next COLA. However, the most recent CPI-W figure available was for March. This number didn't include the full impact of tariffs implemented by the Trump administration. The effects of those tariffs will likely start to be reflected in the CPI-W metric beginning in April. TSCL Executive Director Shannon Benton said in a press release, "Along with most economists, TSCL expects the new tariffs to lead to higher inflation. Our COLA model will likely reflect that in coming months as the CPI-W and other economic indicators respond to the new import tax policies." Benton expressed concern about the impact of tariffs on seniors. She said, "Placing broad-based tariffs on goods from numerous countries could have a profoundly negative impact on the daily lives of seniors, including the costs of drugs and medical equipment that many seniors rely on." Benton added, "It is also highly likely that import taxes will keep food prices high, increase auto insurance costs, and contribute to higher inflation, among other effects." If tariffs do cause inflation to surge, the next Social Security COLA will also be higher than currently projected. However, as explained earlier, a higher COLA isn't good news for retirees. To make matters worse, higher-than-expected inflation and COLAs could cause the Social Security trust funds to run out of money more quickly than projected. The Social Security Trustees currently predict that the trust funds will be depleted in 2035. However, that timeline could be overly optimistic if the inflation assumptions used in the forecast are too low. Unless significant reforms are made to Social Security, retirees could be faced with steep benefit cuts. I don't want to end on such a negative note, though. There is some more good news, too. Retirees in the U.S. have a lot of political power. Few, if any, politicians in Washington, D.C., will want to anger so many of their constituents by allowing major Social Security benefit cuts to happen. Regardless of what next year's COLA is, the chances that Congress and the president will take action before Social Security's trust funds run out of money should be high. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security COLA Forecast: Here's the Good and Bad News for Retirees was originally published by The Motley Fool
