Your 66th birthday is something you may not be putting a lot of thought into. But if you're turning 66 this year, it could impact your financial picture in a very meaningful way. Here's what you need to know.
1. You won't reach full retirement age for Social Security right away
You're entitled to your full monthly Social Security benefit, based on your personal wage history, once you reach full retirement age, or FRA. For those born between 1943 and 1954, FRA is 66, so you may be thinking that your FRA is the same. But actually, if you were born in 1955 and are therefore turning 66 this year, you won't reach FRA until 66 and two months. If you file for benefits at 66 on the nose, you'll reduce them on a permanent basis.
That said, the reduction you face will be relatively minor. Filing for benefits two months early will slash them by roughly 0.84%. This means that if you'd normally be entitled to a monthly benefit of $1,500 at age 66 and two months, filing at 66 will leave you with about $1,487 -- not a substantial reduction. Still, if your goal is to claim your full monthly benefit, keep your precise FRA in mind.
2. Delaying Social Security could still make a lot of sense
Though you may reaching FRA in 2021, the Social Security Administration will reward you for sitting tight and waiting to file for benefits. Specifically, for each year you delay your benefits past FRA, they'll go up by 8%, up until the age of 70. If you're still working or don't need the money right away, it could pay to let your benefits sit and grow, since any increase you lock in will be paid to you for life.
3. It could pay to sign up for Medicare if you haven't done so already
If you're turning 66 this year, it means you're already eligible for Medicare. And you may need to rush to enroll.
Your initial Medicare sign-up window spans seven months, beginning three months before the month of your 65th birthday and ending three months after that month. It pays to enroll on time to avoid gaps in coverage as well as lifelong surcharges on your Part B penalties for going too long without coverage, so if you're still within that seven-month window, you may want to get moving.
That said, if you're still working and are covered by a group health plan through your job, you don't have to worry about being penalized for signing up for Medicare late. In that case, you'll get a special enrollment period that kicks in once you separate from your employer or your group health coverage ends -- whichever happens sooner. Furthermore, you should know that you're allowed to sign up for Medicare without Social Security, or vice versa -- though the two are interrelated, you can get benefits from one without the other.
Turning 66 is a big milestone. If you'll be celebrating that birthday this year, keep the above points in mind to help ensure that you make the best financial decisions for yourself.