There's nothing quite like a whopping 8.7% Social Security cost-of-living adjustment (COLA) to get clients tuned into the value of this program.
Advisors and individuals have been calling to ask about this largest COLA since 1980 (14.3%) and 1981 (11.2%). Ever since the first hints of a possible double-digit COLA surfaced this summer, people have been anxious that they'll miss out if they haven't already claimed benefits.
Key to understanding Social Security when a client hasn't yet claimed is how COLAs are applied between ages 63 and 70. Let's look at how to connect those dots when it comes to COLA.
What to Tell Clients
It's quite distressing to hear clients are willing to upend their retirement income plans to ensure they get this year's COLA. Claiming earlier than planned is a problem. They should not risk their overall plan for short-term assumed gain.
Clients over age 62 who haven't yet claimed will not miss out on the COLA.
COLAs, including the 2023 COLA, automatically apply each year after one's "official" primary insurance amount (PIA) is calculated at age 62. Clients do not need to claim early to get the benefits of the annual COLA.
What's Driving So Much Anxiety?
As retirement gets closer, clients want the most they can get from Social Security. Those who haven't claimed have a case of FOMO (fear of missing out).
The best steps financial advisors can take is to address the issues that may be causing anxiety. We've had a pile-up this year:
- Inflation still running high
- Market unsettled, showing few signs of stabilizing
- Mortgage rates up; housing starts down
- COVID persists
- Hurricanes and wildfires more extreme than ever
It is no wonder clients are anxiety-ridden. So, when there is even a glimmer of good news, everyone wants in. There are two pieces of good news for 2023: Social Security is up, and Medicare Part B premiums are down.
