Should I Delay Social Security and Rely on My 401(k) for 8 Years? I Have $750k in Savings and a Pension

Is it a viable plan to use my 401(k) for the eight years between retirement (age 62) and the max payout age for Social Security (age 70)? I have about $750,000 and I’m planning to take about $1,700 per month. I already have a pension of about $1,500 per month.

–Lynne

Waiting to file for Social Security in order to take advantage of the delayed credits is a good strategy for those who want to maximize their benefits. If you retire before you start claiming your benefits, you’ll need a source of income to bridge the gap between the time your paychecks stop and when your Social Security begins.

If you have a sufficient balance, then yes, withdrawing from your savings is a perfectly viable option to consider. However, that doesn’t necessarily mean it’s the best choice for you. There’s often more than one way to accomplish a goal and you need to consider your own preferences and concerns. (And if you need more help with important financial decisions in retirement, consider working with a financial advisor.)

Understanding Social Security Delayed Credits

As you know, your Social Security checks will be higher the longer you wait to claim them up until age 70. The flip side is they’ll be worth less if you claim them before reaching your full retirement age (FRA).

If you were born in 1960 or later, you’ll receive your full benefit at age 67. If you file for Social Security before reaching FRA, your benefit is reduced by a certain percentage for every month before you turn 67, up to a maximum reduction of 30% at age 62. However, each month you wait increases your eventual benefit up to a maximum of 24% at age 70.

To illustrate the difference, let’s assume your benefit will be $2,000 per month at age 67. If you choose to claim your benefit at age 62, you’ll only receive $1,400 per month (30% less). On the other hand, waiting until age 70 will boost your payment to $2,480 per month. That’s a big difference and it often…