The Stealth Social Security Move That Could Help You Beat Inflation in Retirement

There are certain threats to financial security in retirement everyone should have on their radar. A stock market downturn, for example, could put your savings at risk of eventually getting depleted. And higher healthcare costs than expected could leave you scrambling.

There’s also the threat of inflation to think about. While inflation may not be the same sort of “in your face” threat as a 20% market decline or massive medical episode, it’s a quiet threat that could erode your buying power over time.

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It’s important to have a plan to beat inflation in retirement. And the right Social Security filing decision could be your ticket to maintaining your purchasing power even as costs rise around you.

A delayed claim could work to your advantage

When it comes to filing for Social Security, you have a number of choices. The earliest age to sign up for Social Security is 62. And if you wait until full retirement age, which is 67 if you were born in 1960 or later, you’ll get the monthly checks you’re entitled to based on your wage history without a reduction.

You can also delay your Social Security claim past full retirement age. Each year you wait, until you turn 70, results in an 8% boost to your monthly benefits that stays in effect for life.

How does that tie into inflation? It’s simple. The more Social Security you collect each month, the more valuable the program’s cost-of-living adjustments (COLAs) are likely to be for you.

Social Security benefits are eligible for a COLA each year that’s pegged to inflation. COLAs come in on a percentage basis. For example, this year, benefits rose 2.8% across the board.

But the larger your Social Security checks are to begin with, the more valuable each individual COLA that comes through should be. So waiting until 70 to claim Social Security won’t just give you more money each month to begin with. It could also give you better inflation protection for many years to come.

Make sure waiting on Social Security is the right choice

It’s easy to see the appeal of postponing your Social Security claim until age 70. After all, who wouldn’t want larger monthly checks for life?

But one thing to realize is that delaying your claim may not work out so well financially if you don’t end up living a long life. So you’ll need to take that into account when making your choice.

Even though a delayed claim boosts your checks on a monthly basis, you’re giving up months or years of payments in the process. Waiting until 70 to claim Social Security, for example, means giving up 36 months of benefits compared to filing at full retirement age.

If you expect to live a reasonably long life, then filing at 70 for the boosted checks and added inflation protection makes sense. But if you think you might pass away before even hitting your 80s due to existing health issues, then waiting on Social Security may not be a smart thing.

Of course, there’s one additional factor to consider, and it’s whether you’re married and are likely to pass away before your spouse. If so, and you’re the higher earner in your household, your spouse should be entitled to survivor benefits from Social Security once you’re no longer around.

Your spouse’s survivor benefits will equal the benefits you get to collect, and they’ll also be eligible for COLAs. So even if delaying Social Security until 70 doesn’t make the most financial sense for you on your own, it could be the ticket to leaving your spouse with larger benefits and better inflation protection for the rest of their life.