Automatic Increases
COLA history
Federal SSI benefit rate
Latest COLA determination
Wage-indexed amounts
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General
A COLA increases a person's Social Security retirement benefit by
approximately the product of the COLA and the benefit amount. The
exact computation, however, is more complex.
Each Social Security benefit is based on a "primary insurance amount," or
PIA. The PIA in turn is directly related to the primary beneficiary's
earnings through a benefit formula. It is the
PIA that is increased by the COLA, with the result truncated to the next lower dime.
Example
If the initial PIA is $1,054.50 and it is increased
by a 2.3-percent COLA, the new PIA would be $1,078.70 after
truncation to the next lower dime.
Early or delayed retirement affects your benefit amount
If you choose to retire before your normal retirement
age, your benefit will be lower than your PIA.
On the other hand, if you choose to retire after you attain your normal retirement age,
your benefit will be higher than your PIA.
Steps leading from the PIA to the benefit amount
- A factor is applied to the PIA to account for
early or delayed retirement, with the
result truncated to the next lower dime
- Any offset to the benefit, such as payment of the Medicare
Supplementary Medical Insurance (SMI) premium, is subtracted
- Finally, the resulting amount is truncated to the next lower dollar
Summary
When a COLA occurs, the PIA is increased as described above,
and the steps required to calculate the new benefit amount are repeated with
the new, higher PIA. Due to the rounding, possible offsets, and final truncation
in these steps, the increase in the new monthly benefit amount over the previous
amount may differ somewhat from the COLA.
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