After paying into the Social Security system for decades, you're probably eager to sit back and let those checks start rolling in. Perhaps you're thinking that 2021 could be your year.

But there's a lot of calculation -- as well as some guesswork -- involved in deciding when to start benefits. Claiming early permanently reduces the size of your monthly benefit, but gives you a longer period during which to collect them. If you start later, each check will be larger -- but unless you have a long life, you may not have enough time to make up for the checks you missed by waiting.

Not everyone has the luxury of holding out for the strategy that will maximize their benefits. If you're in your early 60s and taking Social Security is the only way to pay your bills or avoid going deep into debt, you can't afford to delay. But if you have some flexibility and are weighing whether to claim now or hold off, here are some signs that 2021 should be your year.

A bearded smiling man wearing sunglasses and a black hat.

Image source: Getty Images.

1. You've paid off your debt

Living on a retirement budget is a lot easier when you don't have debt. So if you've paid off your mortgage and your car loan, and aren't carrying balances on your credit cards, it's a good sign that you're ready for Social Security. If your expenses are low, you may be able to afford to take smaller Social Security checks sooner because you won't need those checks to stretch as far.

But if you still have significant debt, it may be worth trying to hold out longer. Even if you can't retire debt-free, you can reduce what you owe while boosting the size of your eventual monthly benefit checks. For every year you claim before your full retirement age (FRA), you reduce the size of your monthly benefit by 6.66%. However, for each year you wait past your FRA (until you turn 70), you'll increase your benefits by 8%.

2. You can replace 40% of your income with investments

For Americans who earned an average salary, Social Security benefits will replace about 40% of that income.  But for a reasonably comfortable retirement, financial planners suggest that you will need to replace around 70% to 80% of your previous income. 

If you can replace about 40% of your income through a combination of retirement account withdrawals, dividend income, and other sources such as pensions, you may be ready to start collecting checks. Calculate how much you can afford to withdraw from your portfolio using the 4% Rule, which assumes you can cash out 4% of your investments each year without fear that you will outlive your assets.

Keep in mind that replacing 40% of your income through investments won't be enough if your career income was significantly above average. Your Social Security benefit won't replace 40% of your salary in this case, so you'll need income from other sources to retire comfortably.

3. You're no longer working

Taking Social Security checks early while you're still working will seriously reduce your benefits. In 2021, the program reduces your benefit by:

  • $1 for every $2 you earn over $18,960 until the year you reach FRA.
  • $1 for every $3 you earn over $50,520 during the year you reach FRA until the month you're eligible for your full benefit. 

However, if you're no longer working, it could be time to file for Social Security. On the other hand, if you have reached your full retirement age, you'll still qualify for your entire benefit even if you keep working. That said, it could still be worth holding off to collect larger monthly benefits later on.

4. You've reached FRA and will be claiming spousal benefits

If you're going to be collecting benefits based on a spouse's or ex-spouse's employment history and 2021 is the year you'll reach full retirement age, there's no reason to delay any longer. You won't earn those 8% delayed retirement credits if you're collecting spousal benefits, so you'll get your maximum benefit at FRA.

You can collect whichever is higher: 100% of your own benefit or 50% of your spouse's full benefit. The rules apply to ex-spouses, too, provided you were married for at least 10 years, you've been divorced for two years, and you haven't been remarried.

5. You're celebrating your 70th birthday

If 2021 is the year you reach septuagenarian status, it's also your year to claim Social Security. Your retirement benefits max out once you're 70, so there's no reason to wait beyond that point.

By holding off until 70, you've secured monthly checks that are 77% larger than they would be if you'd started at 62. Knowing that should sweeten your 70th birthday celebration even more.