Yahoo Finance: Sequencing IRA Withdrawals and Social Security Could Add Six Figures to Lifetime Income

A Yahoo Finance analysis indicates that the sequence in which retirees access their assets can determine whether a portfolio sustains a 25-year retirement or depletes a decade early. For individuals holding approximately $500,000 in a traditional IRA, the strategy of drawing down those accounts first while delaying Social Security claims until age 70 could result in a six-figure difference in lifetime income compared to claiming benefits at age 62.

The core of the strategy lies in utilising the years between retirement and the commencement of Social Security benefits to fill lower tax brackets. By withdrawing from the traditional IRA before benefits begin, retirees can manage their taxable income more efficiently. This approach also reduces the magnitude of future required minimum distributions, which are mandated to begin at age 73.

Claiming Social Security at age 62 permanently reduces the benefit by up to 30% relative to the full retirement age amount. Conversely, delaying claims until age 70 increases the monthly payout by approximately 8% per year. For a worker with a full retirement age benefit of $2,000, claiming at 62 yields roughly $1,400 monthly, while waiting until 70 raises that figure to approximately $2,480.

The financial impact of this delay is substantial. Over a 20-year period from age 70 to 90, the difference in payments totals roughly $259,200, excluding the compounding effect of cost-of-living adjustments. The 2026 COLA was reported at 2.8%, which further widens the gap between early and late claimants over time. The breakeven point for this strategy generally falls in the late 70s to early 80s.

This sequencing offers a guaranteed, inflation-adjusted return that is difficult to match in current fixed-income markets. As of July 9, 2026, the 10-year Treasury yield stood at 4.54%, and the national average 12-month certificate of deposit paid 1.65% APY, neither of which provides automatic inflation protection. The Bureau of Economic Analysis reported that the personal savings rate fell to 3.9% of disposable income in the first quarter of 2026, highlighting the importance of optimising existing assets.

Financial planner Suze Orman has discussed similar scenarios, noting that for retirees bridging the gap to age 70, traditional IRAs often move earlier in the withdrawal queue than Roth accounts or brokerages. This is because the low-income years before Social Security commences represent the cheapest period to pay ordinary income tax on those withdrawals.

However, the strategy requires sufficient IRA balances to cover approximately eight years of expenses and assumes reasonable health and longevity. With Social Security transfer receipts totalling $1,630.3 billion in the first quarter of 2026, the programme remains the largest component of household transfer income, making the timing of its activation a pivotal element of retirement planning.