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Is 2021 Your Year to Claim Social Security?

By Christy Bieber - May 2, 2021 at 9:23AM

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Are you ready to start your retirement benefits?

Are you thinking about starting your Social Security benefits in 2021? Before you act, it's important to understand the long-term implications of your decision.

See, your claiming choice can have a huge effect on the amount of benefits you end up with. Undoing the decision isn't easy, and you don't want to regret your choice if it turns out you should've claimed later. 

So how can you be certain 2021 is your year? Watch out for these signs it's time to claim your benefits. 

Older couple talking with financial advisor.

Image source: Getty Images.

1. You understand how your decision will affect your benefit amount

Your choice to claim your checks can affect the amount of your retirement income in two important ways:

  • It can affect the average wages earned over your career
  • It can affect whether you earn delayed retirement credits or are hit with early filing penalties

See, if you retire at your "full retirement age," or FRA, you get a standard benefit equal to a percentage of average wages over the 35 years you earned the most (with wages adjusted for inflation). 

If you make the choice to retire before putting in 35 years, average wages are reduced because you'll have $0 earnings in some of the years included in your average.

On the other hand, if your salary is higher than at earlier points (even after adjusting for inflation), sticking it out a few extra years boosts average wages as higher-earning years replace lower-earning ones in your calculation. 

Your age also affects benefits, because starting them prior to full retirement age reduces your standard benefit by a small percentage each month, while claiming after raises your standard benefit by a small amount each month until 70. 

Once you understand how the benefits formula works, you can determine how your choice to claim in 2021 affects monthly income based on your current age and career history. 

2. You're realistic about the role Social Security will play in your retirement

If you're hoping to retire this year with the expectation that Social Security will support you, 2021 definitely isn't the year to claim benefits. That's because you'll be dooming yourself to a life of financial worries if you quit your job without supplementary savings. 

See, Social Security is supposed to provide just part of your retirement money, replacing about 40% of your pre-retirement earnings. That's not enough to avoid a big decline in quality of life, so you'll want to build a nest egg to supplement your benefits.

If you're already in your 60s, it may feel impossible to do that -- but you'd be surprised how much you can save if you get serious about it and stay in the workforce a bit longer than planned.

3. You know the rules for working while collecting benefits

If you're thinking about working while collecting your benefits, you need to know before you claim them that you may not be able to keep both your paycheck and full Social Security check. 

If you've already reached full retirement age, this isn't a concern; you can work as much as you'd like with no effect. But if you're under FRA, you could forfeit some of your monthly retirement benefit if you earn too much. 

Although the Social Security Administration will recalculate your benefits at full retirement age to account for the forfeited funds and give you higher checks later, this doesn't help if you miss out on entire checks now that you were counting on to supplement your income

Making sure you understand how benefits are calculated, how much income they'll provide, and the rules for how much you can work will ensure you aren't faced with an unpleasant financial surprise after you start your Social Security checks.

Hopefully, you'll discover that 2021 is your year once you've asked these questions. But if you don't, better to know that before you file for benefits and are stuck with a choice you regret.  

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