How Inflation Changes the Social Security Claiming Decision

Key Summary

• The COLA Trade-off: While Social Security provides an annual cost-of-living adjustment (COLA) to help combat inflation, retirees must balance the need for immediate income against the long-term benefit of delaying claims to secure higher monthly payments.
• Benefits of Waiting: Delaying Social Security until age 70 results in significantly higher monthly checks; because COLAs are percentage-based, these larger base amounts yield greater nominal increases, offering better protection against rising prices in the long run.
• Inflationary Pressure on Savings: Rising costs can force retirees to exhaust their personal savings (the "bridge strategy") prematurely to avoid claiming Social Security, though this risks depleting emergency funds and forcing withdrawals during unfavorable market conditions.

Social Security benefits keep up with inflation via a cost-of-living adjustment (COLA) that is determined annually. But inflation also means the costs of products and services are increasing each year, which may cause people to tap into Social Security earlier than expected.

Because delaying when you receive your Social Security means your checks get a boost, retirees have to carefully navigate the trade-off of immediate Social Security benefits that can combat inflation and higher future benefits.

Social Security and Inflation

Inflation can impact everything from how much you’re paying for eggs and coffee to what you’ll have to budget for gas and utility bills. Social Security uses an annual COLA to boost benefits each year. For example, the administration increased Social Security benefits by 2.8% in 2026.

You can get Social Security checks as early as age 62, while the highest monthly retirement benefits are available if you wait until age 70. Many people delay Social Security with wages, retirement plans, and other resources to lock in higher benefits down the road, but inflation can make it harder to delay. Housing, groceries, insurance, and medical costs can continue to climb each year, and retirees whose savings can’t keep up often access Social Security early.

Although high inflation makes it more difficult to wait for Social Security, doing so gives you access to higher benefits that adjust to inflation each year.

Why Delaying Can Be More Powerful When Prices Are Rising

If you claim Social Security before full retirement age, you lock in lower monthly benefits. Delayed credits continue to raise your benefits each month you wait, even after full retirement age. Those delayed credits only stop accumulating when you turn 70.

Higher benefits can translate into higher nominal increases to your benefits each year due to COLA. You will receive more money if the 2.8% hike applies to a $4,000 benefit than if it only applies to a $3,000 benefit.

While delaying offers advantages, it’s not the best approach for everyone. People who have a family history of health issues and lower life expectancies may want to access Social Security earlier, since it may be more difficult for these people to reach the breakeven year (when the amount of money you receive by delaying your benefits catches up to what you would have collected if you had started claiming earlier). Waiting until you are 70 to claim Social Security can be very valuable to people who live into their 80s and 90s.

You may also want to delay until 70 if you were the higher-earning spouse in the marriage. The survivor benefit is based on the survivor’s benefit or the deceased spouse’s benefit, depending on which amount is higher. Waiting until you are 70 to claim Social Security can provide your spouse with more financial security in the event you pass away first.

Inflation Can Also Push Some Retirees Toward Claiming Earlier

The bridge strategy is a popular approach that involves tapping into savings and retirement plans, such as 401(k)s and individual retirement accounts (IRAs), to cover living expenses and delay claiming Social Security. But inflation can make the bridge strategy more difficult.

High inflation can drain savings more quickly, which may force people to take Social Security benefits before turning 70. Other retirees make it to 70 with the bridge strategy but end up with very little emergency funds to cover any surprise costs. The bridge strategy can also force people to withdraw from their nest eggs during down markets, which makes it harder for their portfolios to rebound.

Retirees should assess whether their current cash flow is enough to cover expenses before deciding on Social Security. It’s also important to consider how quickly you are depleting your nest egg and savings.

 

This article was written by Marc Guberti from Money and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.