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Before You Claim Social Security in 2021, Do This

By Maurie Backman – Jan 5, 2021 at 6:06AM

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You might think you're ready to sign up for benefits in the new year, but read this before you do.

If you're turning 62 in 2021, you may be tempted to sign up for Social Security. Similarly, if you'll be reaching full retirement age (FRA) in 2021 (which is the case if you were born in 1955), you may be ready to claim your benefits and start enjoying that money. Before you file for Social Security, make sure the time is really right to start collecting benefits.

Do you need the money, or can you hold out?

Delaying your Social Security filing can benefit you a lot. If you're reaching FRA in 2021 and you're willing to delay benefits a bit, your benefits will grow by 8% a year up until the age of 70.

Older person sitting at laptop.

Image source: Getty Images.

Meanwhile, if you claim benefits before FRA, you'll reduce them on a permanent basis. If you wait, you'll snag a higher benefit. Either way, the longer you wait (up until age 70), the more money you stand to collect on a monthly basis. Rather than rushing to claim benefits, ask yourself if it's possible to hold off.

How might you accomplish that? If you're still working, the answer is simple -- stay at your job a few more years, health and employer permitting. If you're able to extend your career a bit and retain your existing paycheck, you should have a relatively easy time delaying your benefits.

Even if you're not able to continue working full-time, you may still have the option to put off your Social Security filing for a bit. You might instead fall back on income from a pension, a part-time job, or withdrawals from an IRA or 401(k) plan.

The importance of waiting

Why push yourself to delay Social Security as long as possible? It boils down to one thing -- a higher income stream that's guaranteed.

If you leave your IRA or 401(k) alone so it can grow, you might gain wealth in that account, or your investments might lose value if the market tanks. By contrast, putting off your Social Security filing guarantees you more money for each month you wait up until the age of 70. That guarantee could spare you a world of financial stress if you end up living longer than expected and spend down your IRA or 401(k) as a result.

Of course, not everyone can wait on Social Security. If you're out of work or need the money for another specific reason, like a personal health crisis, then filing for benefits is preferable to racking up debt just to live. But depending on your age, you may want to sit tight. Doing so could really pay off in the long run.

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