Wealthy Retirees Spend 401(k)s First to Lock In 24% Higher Social Security at 70
Updated
Updated · 24/7 Wall St. · Jun 12
Wealthy Retirees Spend 401(k)s First to Lock In 24% Higher Social Security at 70
3 articles · Updated · 24/7 Wall St. · Jun 12
Summary
$1.3 million 401(k) holders are increasingly drawing down retirement accounts at 65 and delaying Social Security to 70, lifting a $3,200 monthly benefit at 67 to about $3,968 for life.
That 24% delayed-claiming increase beats current risk-free yields near 4% to 5% and keeps compounding with the 2026 COLA of 2.5%, preserving purchasing power over a long retirement.
Using the 401(k) as a five-year bridge also cuts future required minimum distributions: an untouched $1.3 million balance could exceed $1.7 million by 73, forcing large taxable withdrawals.
Those withdrawals can make up to 85% of Social Security taxable and trigger Medicare IRMAA surcharges, pushing effective marginal rates near 40%; lower-income bridge years also create room for cheaper Roth conversions.
The strategy usually breaks even in the low 80s, making it most attractive for healthy, longer-lived retirees and couples weighing survivor benefits that can be roughly 30% higher if the top earner waits.