Ready For Retirement
Ready For Retirement
Don’t Wait Until 70 for Social Security Unless You Hear This First
Think waiting until 70 is the gold standard for Social Security? We dig into the real math behind delayed retirement credits and the hidden trade-offs that rarely make it into the headlines. Drawing on years of planning experience and two vivid case studies, we show how the “bigger check later” can either amplify your lifetime income or quietly drain the resources you need to feel secure.
We start with the promise of delayed credits and then zoom out to the full picture: how bridging years are funded, how portfolio withdrawals reduce compounding, and why taxes can swing the outcome. You’ll hear about Greg and Michelle, a couple who used low-income years to convert IRAs to Roth, trimmed future RMDs, and paired those moves with higher benefits at 70. Then meet Linda, who spent down her savings to wait for a larger benefit and ended up with a thinner cushion and more anxiety. Along the way, we break down longevity assumptions, the importance of survivor benefits, and the outsized impact of sequence risk when markets fall during your withdrawal window.
By the end, you’ll have a practical framework to compare claiming ages on an after-tax basis, stress test market downturns, and decide whether you value maximum lifetime income, early-retirement flexibility, or a blend of both. If you’ve ever wondered whether to file early, wait until full retirement age, or push to 70, this is your roadmap for choosing the path that fits your health, taxes, investments, and lifestyle.
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The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
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You've probably heard some version of this before. You should always wait until age seven to collect social security. That's how you get the most money. But here's the thing: that's not actually true for everyone. And in fact, for many people, it's quite the opposite. So before you commit to delaying, let's first talk about when that decision might backfire. As a financial advisor, I've worked through this exact math with hundreds of clients before and really seen the nuances and the intricacies of when might it make sense to delay versus when might that actually cost you. So let's start by understanding the math here. The idea of waiting until 70 comes from very simple math. Once you reach your full retirement age, every year beyond that that you wait up until age 70, you get the benefit of a delayed retirement credit. A delayed retirement credit comes up to 8% per year, broken down into monthly increments that continues to grow your benefit all the way until it maxes out at the age of 70. On paper, that sounds unbeatable, but retirement's not lived on paper. It's lived in reality. And this decision on Social Security actually impacts every other decision with your financial planning as well. This will impact your investments, your taxes, and even your overall lifestyle strategy. So before you delay, let's take a look at what that impact might be so you can see what might make most sense for you. To do this, I'm going to provide some additional context around waiting until 70 and some of the implications. And then I'm going to show you two case studies. One where this worked, one where it didn't, so you can identify what makes sense for you. So going back to collecting at age 70, it is absolutely true that if you wait until 70, that benefit at age 70 is the highest benefit you could possibly receive. There is no disputing that. But there are trade-offs. The biggest trade-off that people fail to understand is this. Let's assume you're going to retire at 62. You retire at 62, but you want to delay your social security benefit until 70 because you know you're going to lock in a higher investment amount or a higher income amount, I should say. But in those gap years, during that eight years of time, where's income going to come from? Well, for most people, income is going to come from their portfolio. Nothing wrong with that. We invest so that one day we can withdraw. But here's the context, or here's what that matters. If you start pulling from your portfolio at age 62 and you do that for eight years, that's eight years of money that you're pulling out of your portfolio, and there's an opportunity cost to that. And to properly frame that, people don't collect their social security benefit early because there's an opportunity cost. It's going to cost them the higher amounts of social security that they could have later received had they waited until later age, such as 70. Well, that same thing applies to your portfolio. Every year that you're drawing down your portfolio, that's less money that would have otherwise been growing for you. Now, this obviously is different if you continue working all the way until 70 and then collect your benefit then. At that point, it probably does make sense to collect at 70. But understand that if you're stopping work before then and you're drawing down your portfolio, you are simultaneously increasing your social security benefit, but also decreasing your portfolio and decreasing the income you could potentially create from your portfolio. So don't just look at this number increasing, also understand what's the offset. And what you really should be looking at is what's the highest net combined amount that you could receive between Social Security and your portfolio, not just looking at this number growing all the while this number on the back end is continuing to decline. Now, the other trade-off, of course, put simply is no age is guaranteed. Yes, we can plan and yes, we can take care of our health, and yes, we can look at family longevity, but we're not guaranteed any number of years on this earth. So yes, we should plan prudently, but there is something to be said if we don't know if we're gonna make it. We don't know how long we have. So there's a delicate balance there. But of course, if you're not in good health, if you don't have longevity in your family, waiting until 70 might maximize your monthly benefit. But we're more concerned about isn't just the monthly benefit, it's the lifetime social security benefit. And it's not even just the lifetime social security benefit, as I just mentioned, it's your lifetime cumulative income benefit from all of your income sources, including not just social security, but also your portfolio, which will be generating income for you as well. So, how do we not look at just the small number, but look at the big picture number to understand what makes most sense? So let's look at two case studies when it worked, when it didn't, so you can understand how these different things tie together. Case study number one, you have Greg who's 66, Michelle, who's 64. They have plenty of savings, including a lot of money in a brokerage account and cash. They had moderate spending, and they had a significant balance of money in their pre-tax IRAs. They also were in great health and they had longevity on their side when they looked at family history. Now, what worked for them? What worked for them was to delay until 70. Here's why. By delaying until 70, not only were they maximizing that social security benefit, which would last them for the rest of their lives, but they're also able to live on some of their cash and brokerage account balances. What that did was it kept their taxable income very low for those first four to six years until both of them hit age 70. During those years, we didn't just sit back and enjoy having a low tax bracket. We said, let's take advantage of this. Let's capitalize on this and start shifting some of the money from our pre-tax IRAs into our Roth IRAs. So by using low-income tax years to do so, we were able to shift a large amount from their IRAs to their Roth IRAs so that when required distribution age began, not only did they have large social security benefits, but if they hadn't done any Roth conversions, they would have had a very large required minimum distribution. So when you stack two max social security benefits, high required minimum distributions on top of any other dividends or interest or income sources they have, that's a really high tax bracket that are all of a sudden pushed into. By delaying Social Security, not only did it maximize income, but it allowed them to position their Roth assets for maximum long-term growth because that was money that would never be taxed again. So for Greg and Michelle, it worked wonderfully to delay until 70. Now, on the flip side, we have Linda. Linda was 63, in moderate health, moderate family life expectancy. She decided to wait until 70 because everyone said it's best. Well, what Linda didn't anticipate is that her portfolio value was diminished greatly. Now, what Linda didn't fully expect is yes, she knew that social security was going to be high, but what she had to do to get there cost her quite a bit. She had to spin through most of her portfolio assets between 63 and 70. So by age 70, she had a good benefit, but she didn't feel very secure going forward because that social security income met a good amount of her needs, but she didn't have much extra. And not only did she not have much extra, but she felt a bit insecure. She felt anxious about what if there's a major health event? What if something happens? And what she failed to account for was yes, she maximized social security, but the cost of that was diminishing or drawing down much of her portfolio reserves. So for Linda, waiting until 70 didn't hurt Social Security. It just hurt other aspects of her plan. And when she looked at the whole picture, what she realized is that had she collected sooner, not necessarily at 63, but collecting sooner probably would have saved her a lot of heartache. So to summarize, there's wonderful reasons to wait until 70 to collect at 70, not the least of which is survivor benefits to protect a potential surviving spouse here. But here's some cases where waiting until 70 might not make sense. Number one, you don't have great health or longevity in your family. If you don't have a long life expectancy, waiting until 70 maximizes your monthly benefit, but probably reduces the overall income you're going to receive from Social Security and other sources over your lifetime. The second instance when it might not make sense is you have to draw heavily from your portfolio in order to make it until age 70. If you have to draw heavily from your portfolio, sure you're maximizing your income, but you're simultaneously diminishing the amount of income that portfolio can then create for you over the rest of your lifetime. Now, part three is really a continuation of this. What if not only are you drawing down your portfolio, but you get hit with a major bear market in the midst of all this? If you go back to Linda's example, what if it wasn't just drawing down her portfolio, but then the market's down 30% or 40%? That is really putting significant pressure on the portfolio, probably drawing down the portfolio too quickly, and then that is gone. So yes, there's a great social security benefit, but there's no more liquid reserves. There's not an additional amount on top of that, depending, of course, on the portfolio balance. And then number four, you might just want flexibility. One thing that's important to know is not all years are created equal. Your early years of retirement, you're spending a whole lot more, you're doing a whole lot more, you're traveling, you're enjoying. Your later years of retirement, probably not as much. So there's something to be said of do you take it now? Do you enjoy it now? Now that mindset very much needs to be kept in check because we have a tendency as people to over-prioritize gratification today and under-prioritize gratification in the future. So yes, it can provide far more flexibility to take social security today to enjoy it today, but make sure you're not doing that at the cost of your tomorrow. So finally, in closing, delaying social security until 70 is not a one-size-fits-all solution. It's one potential strategy. And like any strategy, it only works if you first examine your income, your tax situation, and your overall strategy to see if that makes most sense for you. So before you decide to collect at age 70, run the numbers both ways. Say what factors are most important to me? How will each impact my investments, my tax strategy, my flexibility, and then make the decision that's best for you.
