By Tom Margenau
I know many people are saying, “Good riddance” to 2020, partly due to political turmoil but primarily due to the deadly COVID-19 virus. But as for me, I have been dreading 2021. Why? It has to do with the increase in the Social Security full retirement age. And therein lies a story.
For the first half-century of the Social Security program, life was simple. You could wait until 65 to collect full benefits. Or you could take a reduced benefit as early as age 62. The term “full retirement age,” or FRA, didn’t exist and wasn’t needed.
But in the early 1980s, the Social Security program was reaching a financial crunch point. So, President Ronald Reagan, working with Congress, formed the bipartisan “National Commission on Social Security Reform.” I got involved in some of their meetings—in a very minor role. And what was that role? Think “gofer”—as in: “Yes, Senator, would you like a cup of coffee? I’ll see if I can get you one.” But, hey, at least I was in some of the rooms where commission meetings were taking place.
Anyway, one of the many recommendations to come out of those forums was a proposal to increase the Social Security retirement age from 65 to 67. But they didn’t do it overnight. It was to be phased in over an almost 50-year period.
And before I go on, let me dwell on that point a minute. I hear from many readers who tell me they plan to sign up for Social Security sooner than they wanted to because they are fearful that changes will be made to the program in the near future and they want to get “grandfathered” into the current system.
My advice: Do NOT make personal Social Security choices based on what you think Congress might do to Social Security in the next few years. There is no question that the program will be reformed in the not-too-distant future. But I will bet my next Social Security check that any major changes will be phased in over a long period of time (as happened in the 1980s) to give people a chance to adapt to them.
Back to the phase-in of the age-65 to age-67 retirement age. Here is the way it was set up. The retirement age remained at 65 for anyone born before 1938. But for people born in 1938, the retirement age was bumped up to age 65 and 2 months. For people born in 1939, it was 65 and 4 months. And the retirement age continued to go up in two-month increments until we reached people born in 1943. They had to be 66 to get full Social Security benefits.
And for reasons I’m not entirely sure of, the reform commission decided the age should plateau at age 66 for the next 11 years. In other words, the retirement age is 66 for anyone born between 1943 and 1954.
That means for the past decade or so, I’ve been able to tell most of my readers that their retirement age is 66. I usually didn’t have to use the rather awkward phrase “full retirement age” because I could just say 66.
But now we are coming out of that 11-year hiatus, and the retirement age starts creeping up again. So, people born in 1955 have to be 66 and 2 months to get full benefits. People born in 1956 have to be 66 and 4 months. And once again, the age continues to climb in two-month increments until we get to people born in 1960 and later who have to be 67 to get full benefits.
So, the reason I have been dreading 2021 is that people born in 1955 are reaching full retirement age in 2021. And again, those folks have to be 66 and 2 months to collect benefits. That means for the next half-decade or so, instead of simply saying, “When you reach age 66, this or that will happen,” I am going to have to say, “When you reach your full retirement age, this or that will happen.” And then I’m probably going to have to explain what I mean by “full retirement age,” because lots of people aren’t familiar with it. Oh, well, who said the life of a Social Security columnist was simple?! And now here are some questions from people in the emerging 66-plus retirement category.
Q: I was born in 1955. I will turn 66 on March 1, 2021. But I know that to get my full benefit, I must be 66 and 2 months, which will be May 1, 2021. I want my full retirement benefit. So, when I file, do I put down March 1 as my starting date and let the SSA computers figure out my full age? Or do I put down May 1? Or because I know the May check will come in June, do I put down June 1?
A: None of the above. You will indicate April as your starting month. (For Social Security benefit starting purposes, you don’t worry about days, just the month you want your checks to start.)
Also, you don’t worry about when the check will actually show up in your bank account. You just worry about which month you want to be your first month of eligibility for Social Security checks. And if you want your full retirement rate, you normally would indicate May.
But in your case, we have an additional twist. There is a common law (not a Social Security law) that says you legally attain your age on the day before your actual birthday. So, you will legally reach age 66 and 2 months not on May 1 but on April 30. Because you reach FRA on that last day of April, you will indicate April as the month you want your benefits to start.
Q: I was born in February 1959. So, my full retirement age will be age 66 and 10 months. But I want to start my benefits at age 62. Do I have to be 62 and 10 months to do that?
A: No. When they changed the full retirement age, they did not change the early retirement age. It remains age 62 for everyone, no matter what your FRA is. But you should know this. You will be assessed with a bit more of a reduction for starting your benefits at 62. The reduction has been 25 percent for people whose FRA was 66. But because of the extra months between age 62 and your FRA (66 + 10 months), the age 62 reduction will be a bit more—somewhere near 29 percent.
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