I have a 7 year old, 20", 2.4 GHz Intel Core 2 Duo, 4 GB iMac which works fine. Is there any reason to buy a new iMac? Do hard drives get worn out? When I read the specs on the new 21.5" iMacs, they don't seem much better than my iMac.
Well ... it depends on what you are using it for. If you use it for web surfing and emailing etc. you won't really see a difference. However, if you use it for professional uses like video/photo editing or 3D rendering then you will see a significant boost in performance.
Just because the specs are similar doesn't mean that the hardware performs identically.
Conclusion time: If you are using it for basic tasks then no. Don't upgrade.
If you make money from the work you do on the computer then hell yeah, upgrade!
As robert05au said, yes HDD's can wear out. Maybe it would be a good time to upgrade to an SSD?
Well, everything wears out after a while - even SSDs. As long as you keep good backups, then you're insured against hard drive failure. If you're happy with what you have at the moment, then I don't see why you should change.
Yes, I do backup, but not with Time Machine. I use a nother brand designed for Mac. Would converting to SSD give me better performance? What would be the approximate cost including the labor?
I decided on a 1 TB hybrid drive to replace my hard drive. This gives me some of the benefits of a SSD a much lower cost. It will cost $265 including all parts and labor, not cheap but I didn't want to tackle it myself. That should keep my iMac good for many years hopefully.