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Turning 66 Next Year? Beware This Social Security Change

By Christy Bieber - Dec 29, 2020 at 9:30AM

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It could affect the size of your benefits.

If you're turning 66 next year, you may be thinking about claiming your Social Security benefits if you haven't already done so. But before you take action, it's important to know the rules for you will be different than they were for people who've started getting their checks in recent years. 

In fact, there's a change coming next year that could very well affect the amount of income your retirement benefits provide. Before you file for your checks, you need to make absolutely certain you understand what this shift in the rules means to you. 

Older man and woman using calculator and looking at financial paperwork.

Image source: Getty Images.

This Social Security change could affect when you decide to claim benefits

For the past 11 years, seniors who hit the age of 66 reached a milestone. They became eligible to claim their standard Social Security benefit, which is based on their average wages with no early filing penalties or delayed retirement credits applied to it. This occurred when they hit their full retirement age (FRA). 

Seniors turning 66 next year, however, won't reach that milestone right on their birthdays. Instead, those who hit age 66 next year who claim their benefits immediately would actually be subject to two months of penalties. These reduce your benefits by a small amount each month that you claim your benefits ahead of FRA.

Those who reach 66 in 2021 will have a later FRA for one simple reason: 1983 amendments to Social Security began gradually moving back the age at which retirees could get their full benefit. This was done to shore up the program's finances back in the 1980s, when lawmakers became concerned about the long-term stability of the retirement entitlement program. 

The 1983 changes to the law gradually phased in a later full retirement age. For everyone born between 1943 and 1954, FRA was 66. However, anyone who was born within those birth years will have hit that milestone and reached their FRA by the end of 2020. And anyone who is going to turn 66 next year or later will no longer be able to claim their benefits right away and get their standard amount. 

FRA will gradually be moved back by two months each year, so those born in 1955 will have an FRA of 66 and 2 months, those born in 1956 will have an FRA of 66 and 4 months, and so on. Finally, anyone who is born in 1960 or later will have an FRA of 67. That's currently the latest FRA for any future retiree, although that could change if lawmakers pass another compromise bill to deal with Social Security's current financial woes. 

Unfortunately, many Americans don't know exactly when their FRA is. And if you're one of them and were planning to claim Social Security when you turn 66 next year, you may be in for a surprise when you see your benefits shrink if you don't wait.

At 1.11% for retirement benefits, the reduction in the size of your checks isn't a huge one if you file to start them just two months ahead of schedule. But that can still add up month after month. Rather than face that cut to your income, it's best to be aware that your eligibility for your full benefit won't start until a little later and put off getting your Social Security benefits for just a little bit of extra time if you can.

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