Mike Piper, over at Oblivious Investor, discussed Social Security and Inflation Adjustments recently. Mike wrote that inflation-related adjustments to security come in two forms: one based on earnings history and the other based on retirement or disability benefits. When indexing your monthly earnings history, the indexing is based on wage inflation. Cost of Living Adjustment is begins when you turn 62, and affects anyone who receives benefits through you.

Key Takeaways:

Mike had received an assortment of questions about how, exactly, Social Security inflation adjustments work.
In brief, there are two types of inflation-indexing that occur with Social Security: indexing of your earnings history and indexing of retirement/disability benefits (and other benefits based on retirement/disability benefits).
In the event of death or disability prior to age 62, rather than using age 60, the calculation uses the year that is two years prior to the year in which you die or became disabled.

“In the event of death or disability prior to age 62, rather than using age 60, the calculation uses the year that is two years prior to the year in which you die or became disabled.”

Check out Mike’s post here:

http://www.obliviousinvestor.com/social-security-inflation-adjustments-cola-and-wage-indexing/