If you are turning 66 this year, there's something very important you should know about Social Security.
A change to the rules is occurring that you must understand before you claim your benefits. That's because it can affect the amount of income you get each month for the rest of your life.
Here's what you need to know if you'll be celebrating your 66th birthday this year.
This change to Social Security will affect benefits for retirees turning 66
To understand the rule change that will affect you if you're turning 66 next year, you need to know a few basic facts about how Social Security benefits work.
You receive your standard benefit if you retire at exactly full retirement age (FRA). Your standard benefit is your primary insurance amount calculated based on how much you earned during your career.
You are hit with early filing penalties for any month you get a Social Security check prior to FRA. So if you get benefits one month early, you face one month's worth of early filing penalties. These reduce your monthly check amount, leaving you with smaller benefits each month for the rest of your life.
You earn delayed retirement credits for any month you put off the start of your Social Security benefits. These credits raise your payment, giving you more money each month for the rest of your life.
This all means your FRA plays a crucial role in the amount of money Social Security provides to you.
Since FRA is so important, everyone turning 66 this year needs to know their FRA is changing. It's also changing for people who won't hit this milestone until future years. FRA is going to be a little bit later for anyone who turns 66 in 2022 or in subsequent years than it was for retirees who have already reached this key birthday.
How FRA is changing if you're turning 66 in 2022
Amendments to Social Security in 1983 slowly phased in a change to FRA. As the chart below shows, here is when full retirement age is, based on the year you were born.
Full Retirement Age
66 and two months
66 and four months
66 and six months
66 and eight months
66 and 10 months
1960 or later
As you can see, if you'll celebrate your 66th birthday in 2022, your FRA will be 66 and four months — two full months later than it was for people who turned 66 last year and four months after most retirees who came before you.
The result of this change is that if you want your full benefit without any penalties imposed, you'll have to wait for an extra two months in order to get it. This, unfortunately, is a de facto benefits cut, since you're faced with either giving up two months of income this year or accepting less in each monthly check going forward.
It also means that if you max out your delayed retirement credits, you'll still get two fewer months of them versus what retirees in previous years could earn. So the amount you can expand your benefits by waiting to file for them is reduced.
Make sure you're aware of this big change when you make your decision about when to start Social Security checks — and when calculating how much income your monthly benefits can provide.
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