When Should You Take Social Security? A Smarter Approach

You’ve probably heard it before: “Wait until age 70 to take Social Security so you get the biggest benefit.”

That advice sounds simple, and for some retirees, it might work. But as one federal couple discovered, following that rule without considering the rest of your financial picture could add unnecessary stress and higher taxes to your retirement.

Let’s look at how Karen and Tom, a federal couple in their early 60s, took a smarter approach to Social Security timing.

Karen and Tom’s Financial Picture

Karen (64) and Tom (62) plan to retire soon. Their goals are simple and familiar: keep taxes low, make the most of their benefits, and leave something behind for their kids.

Here’s their snapshot:

• Total assets: $2 million
• Investments: $1.5 million (pre-tax IRAs and a taxable brokerage account)
• Savings: $30,000
• Home: $500,000 value, $100,000 remaining mortgage (paid off in 3 years)
• Spending goal: $9,500/month after-tax (after mortgage)
• Travel: $15,000/year through their mid-80s
• Pension income: $4,500/month (Karen’s federal pension)
• Portfolio allocation: 75% stocks, 25% bonds/cash

At first glance, Karen and Tom’s plan looks strong. But when they began evaluating when to start Social Security, they faced some key questions:

When should they start Social Security? Before 70 or after? Would waiting until 70 actually make their plan better, or put more strain on it?

The Problem with Waiting Until 70

The traditional logic says waiting until 70 maximizes benefits because each year past your full retirement age increases your payment by about 8%. That’s true—but for Karen and Tom, it also created hidden risks.

If they waited until 70, they’d need to withdraw about $86,000 per year from their portfolio to cover expenses, taxes, and the mortgage. Their $375,000 in bonds and cash would only cover about four years of those withdrawals. Beyond that, they’d be forced to sell stock investments, possibly during a downturn, risking losses or painful spending cuts.

Waiting also created tax challenges.

• Early in retirement, their taxable brokerage withdrawals might generate 0% capital gains tax.
• But by 2028, that account would run out, forcing them to draw heavily from IRAs taxed as ordinary income.
• Once Social Security started at 70, up to 85% of their benefits could become taxable, creating what’s often called a “tax torpedo.”

Exploring a Smarter Option

With those trade-offs in mind, Karen and Tom considered an alternative approach:
starting Social Security earlier, around their Full Retirement Age (FRA) of 67.

They didn’t have to guess what that might look like. The differences were straightforward:

• Year 1 (2026): Withdraw ~$86,000 from their portfolio—same as before.
• Year 2: Karen begins Social Security at 67, reducing the need for portfolio withdrawals.
• Year 3: Tom starts at 67, further lowering withdrawals and preserving more of their investment balance.

This approach reduced the pressure on their portfolio early in retirement, helping them maintain their lifestyle without worrying about market swings or large annual withdrawals.

Why This Social Security Strategy Worked for Karen and Tom

Starting Social Security earlier slightly reduced their lifetime benefits, but it also provided several practical advantages:

1. Reduced Portfolio Stress
   By adding reliable income earlier, Karen and Tom avoided years of heavy withdrawals, allowing their portfolio to stay invested and recover naturally from market fluctuations.
2. Smoother Taxes Over Time
   Taking Social Security sooner helped spread income more evenly, avoiding the spike in taxable income that could occur later when combining IRA withdrawals, pension income, and Social Security.
3. Protected Their Lifestyle Goals
   This strategy supported their $9,500/month lifestyle and travel goals while maintaining flexibility. It also helped preserve more assets for potential legacy planning.
4. Aligned with Their Risk Tolerance
   They preferred consistency and simplicity over maximizing benefits. This plan gave them both.

The Big Lesson

The “wait until 70” rule isn’t wrong, but it’s not right for everyone.

For federal employees like Karen and Tom, the best Social Security timing depends on more than just the size of your monthly check. It’s about how that income fits alongside your pension, TSP or IRAs, tax situation, and spending needs.

Sometimes, starting benefits a few years earlier can reduce taxes, preserve savings, and create a smoother, more confident retirement.

If you’d like help evaluating when to take Social Security, talk with an advisor who understands federal benefits and the tax implications of each choice.

We would love to help discuss your options. Simply click the green “Talk with an Advisor” button above and we’ll connect soon. 

Disclaimer

This material is for informational purposes only and is not intended to provide tax, legal, or investment advice. Always consult with a qualified professional regarding your specific situation.