You may have big plans in store for 2021, like scaling back your working hours, retiring fully, or signing up for Social Security. But before you move forward with the latter, be sure to answer these important questions.

1. Will I be reaching full retirement age?

You're allowed to claim Social Security as early as age 62, but you're not entitled to your full monthly benefit based on your earnings history until you reach full retirement age, or FRA. FRA is a function of your year of birth, as follows:

Year of Birth

Full Retirement Age




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later


Data source: Social Security Administration.

If you were born in 1955, you could be reaching FRA in 2021. Meanwhile, if you were born in 1959, you're eligible to claim your benefits, but at a reduced rate. That reduction, however, will remain in effect for the rest of your life unless you undo your filing within a year and repay the Social Security Administration every dollar it paid you within that same time frame.

Smiling older man

Image source: Getty Images.

2. How badly do I need the money?

Taking a hit on your Social Security benefits by claiming them early may not be a terrible thing if you have a healthy level of savings and want that money to enjoy the first stage of retirement. Similarly, you may have to sign up for benefits if you're out of work and don't have enough savings to live on -- whether you've reached FRA or not.

But unless there's a compelling reason to sign up for Social Security next year, it could be in your best interest to wait. If you're able to sit tight until FRA, you'll avoid slashing your benefits. And if you delay your filing past that point, your benefits will increase by 8% a year, up until age 70. That increase will then remain in effect for the rest of your life.

3. Do I intend to keep working next year?

Your employment plans for 2021 could play a role in your decision to sign up for benefits. Though you're allowed to work and collect Social Security simultaneously, doing so before reaching FRA means you'll risk having a portion of your benefits withheld if your income exceeds a certain threshold known as the earnings test limit.

In 2021, you can earn up to $18,960 without it impacting your benefits. From there, you'll have $1 in Social Security withheld for each $2 you earn. If you'll be reaching FRA in 2021, that earnings limit increases to $50,520, and beyond that point, you'll have $1 in Social Security withheld for every $3 you earn.

To be clear, withheld benefits aren't lost completely. Rather, they're added back into your monthly payouts when you reach FRA. But the reduction in benefits you'll face by claiming Social Security before FRA will be permanent if you don't undo your filing in time, so if you're going to keep working, you may not want to file for benefits unless you're reaching FRA in 2021.

The decision to claim Social Security is a big one. If you're contemplating that for 2021, put a lot of thought into it beforehand and consider the consequences of filing at your specific age at the time. With any luck, you'll make a good choice that serves you well throughout retirement.