Did you know there's bipartisan legislation that aims to change when you claim Social Security? The legislation is also supported by several senior citizens groups.
If you didn't know about this, you're not alone. But you should be aware of the proposed law, as it could have a big impact on your Social Security choices.
Here's what you need to know.
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Lawmakers want to change when you claim Social Security
The bill that aims to change your Social Security claiming decisions is called the Claiming Age Clarity Act.
According to Reps. Lloyd Smucker (R-Pa.) and Don Beyer (D-Va.), the goal of the act is to "help seniors better understand how the timing of their decision to claim Social Security affects their monthly benefit."
The legislation was introduced last year and would make some major changes to the language the Social Security Administration uses when explaining benefits to seniors. Specifically:
- Age 62 would no longer be called "Early Eligibility Age." Instead, it would be called "Minimum Benefit Age."
- Full Retirement Age (FRA) would be changed to "Standard Benefit Age." This is age 67 for anyone born in 1960 or later.
- Age 70 would no longer be called "Delayed Retirement Age." Instead, it would become "Maximum Benefit Age."
The Bipartisan Policy Center, along with numerous senior advocacy groups, has come out in support of this rule change. Unlike the current language, which some may find vague and confusing, the new names would make clear that a decision to claim at a specific age could increase or decrease the standard benefit.
Why do lawmakers want to try to change when you claim Social Security?
Rep. Beyer explained why lawmakers believe this bill could be helpful in influencing retirees' decisions about when they claim Social Security.
"Our bill would be an important first step toward helping older Americans make clearer, more informed decisions about when to claim their retirement benefits. By better reflecting the design of Social Security's claiming options, individuals can choose the claiming age that best fits their individual financial needs," Beyer said.
Senators Bill Cassidy, Christopher Coons, Susan Collins, and Tim Kaine also came out in favor of the bill in the Senate, with Coons stating, "This is a commonsense solution that makes it easier for every American to make an informed decision about when to claim benefits at the best time and get the most out of their retirement income."
How would the bill change your Social Security claiming choices?
The legislation on the table doesn't force anyone to claim Social Security at a specific time. However, the new names of the different claiming ages would make it easier to see the impact of your choice.
Specifically, a claim at 62 can shrink Social Security checks by 30% compared with a claim at an FRA of 67, while a claim at 70 increases the standard benefit by 24%. Many retirees don't fully realize that, as Nationwide research reveals that just 21% of people even know when their full retirement age is.
The theory behind the bill is that if the names change, retirees would clearly see that a late claim offers more money while an early one shrinks their benefits and leaves them more reliant on their 401(k) or other retirement investments.
A clearer understanding of what the claiming age does to benefits could help people in the retirement planning process and potentially also encourage them to invest more aggressively in their retirement accounts.
