Why high-net-worth retirees should delay Social Security claims until age 70

Financial experts advise that retirees with substantial assets, such as a $1 million portfolio and a $100,000 annual pension, may benefit more by delaying Social Security claims until age 70. This strategy leverages delayed retirement credits, which increase the benefit base by approximately 8% per year up to age 70, resulting in a total increase of around 24% for those born in 1959. Experts highlight that Social Security provides guaranteed lifetime income and inflation protection via Cost of Living Adjustments (COLAs), which helps mitigate the risk of outliving one’s portfolio. The decision to delay is particularly relevant for spousal survivor benefits, depending on whether the pension offers full spousal survivorship.

A case study involving a retiree named Patrick (born 1959) illustrates the strategy: he has a $100,000 pension and $1 million in investments, allowing him to retire at 67 while waiting to claim Social Security at 70. Patrick’s potential annual income from his pension and investments (using the 4% rule) is estimated at $140,000, providing a financial buffer to delay Social Security. Christopher Walsh of Capital Choice Financial Group notes that delaying provides a guaranteed income from the government for life.

Evan Mills of Scholar Advising distinguishes between retiring and claiming benefits, stating that having funds to retire does not necessitate immediate Social Security claims. Mills emphasizes that the primary risk for retirees is outliving their portfolio rather than dying before recouping delayed benefits. He argues that taking a permanently reduced benefit by claiming early is detrimental if the retiree relies on this money long term, as the reduction persists for life.

Aaron Ulrich of Integra Financial Planning LLC advises checking pension survivorship terms; if the pension does not provide 100% spousal survivorship, delaying Social Security acts as a de facto survivorship plan. Ulrich notes that if the pension-holding spouse dies, the surviving spouse’s income may drop significantly unless Social Security benefits are maximized. Conversely, if the pension provides full spousal survivorship, the urgency to delay Social Security for spousal protection diminishes.

Studies cited by the Mari Group and the National Bureau of Economic Research suggest around 90% of people receive more lifetime benefits by claiming at age 70. Since life expectancies have increased, more retirees benefit from waiting. For Patrick, who can generate $140,000 annually from his pension and investments, delaying Social Security until 70 locks in a larger benefit for both him and his wife, ensuring financial security regardless of who outlives the other.