Social Security COLA For 2027 is 3.60%
Social Security beneficiaries are getting a pay bump in 2027. Next year's annual cost-of-living adjustment is 3.6%. Driven by inflation, it’s the largest annual COLA since 2023. On average, Social Security retirement benefits will increase by $75 a month, according to the Social Security Administration. Also, the full retirement age is rising in 2027—those born in 1960 will turn 67 next year and will be the first age group to reach full retirement at age 70.
Should I Wait?
Should clients wait until full retirement age or later to claim benefits? It depends on several factors, but waiting from age 62 to 70 increases monthly benefits by 77% for life. A larger base also amplifies the annual COLA. However, waiting until age 70 assumes you have other income sources to cover living expenses. The average age of retirement in California is 64¹. Therefore, waiting until age 70 is, on average, 6 years after retirement; where will the income come from? Continuing to work to 70 is probably the best option, or using savings accounts to provide income. Withdrawing funds from your retirement account to fill the gap is not recommended in most cases – the funds could be fully taxable. In that case, you defer larger future cash flows at the expense of reducing tax-deferred retirement account balances by the amount of the withdrawals.
¹ https://johnstevenson.com/how-many-years-will-it-take-to-retire-in-your-state/
The Impact of 67
Six seven isn’t just kid talk. The full retirement age (FRA) of 67, which applies to beneficiaries born in 1960 or later, also affects how they claim Social Security. For those with an FRA of 67, claiming early at 62 results in a larger 30% haircut. For example, someone entitled to $2,000 a month at full retirement age would receive $600 less each month if they claimed Social Security at age 62.
There are many factors to consider when deciding to begin your Social Security Benefits, including the potential penalty for anyone receiving SS benefits before 67 and still working, or the ability for a divorced spouse to be eligible for spousal and survivor benefits provided they had been married for at least 10 years to the former spouse. In addition, dependent benefits may be available for eligible recipients who have children (under age 16) at home.
Please call (925) 484-1671 or email us to ask a question or schedule a no-charge consultation to discuss the best strategy for your Social Security Benefits.
