The Social Security Bridge: Why You Should Spend Your Portfolio First
The Social Security Bridge: Why You Should Spend Your Portfolio First
๐ WHO THIS IS FOR
- Target Profile: Retirees aged 60-67 with sufficient assets ($500k+) to cover expenses without Social Security.
- Primary Objective: Longevity Risk Hedging (Maximizing guaranteed income at age 85+).
- Not Suitable For: Those with short life expectancy (<75) or zero liquid savings.
EXECUTIVE SUMMARY
- The Instinct: “I worked hard for my Social Security; I want it now (Age 62).” This fear of “leaving money on the table” leads retirees to claim a permanently reduced benefit (-30%).
- The Strategy: The Social Security Bridge involves delaying your claim until Age 70. To fund your life from 62 to 70, you intentionally deplete your 401(k)/IRA/Cash investments.
- The Math: For every year you delay (from 67 to 70), your benefit grows by 8% guaranteed (plus inflation adjustments). No commercial product offers a risk-free, inflation-protected 8% return.
- Authority Baseline: Research by Morningstar and Boston College confirms that “Bridging” is the most efficient way to increase safe retirement income, beating virtually all annuity products.
Thinking of your portfolio as a “Bridge” changes everything. You aren’t spending down your assets; you are buying a higher pension from the US Government. Buying an inflation-adjusted annuity at age 70 is expensive. Getting it by simply delaying Social Security is the cheapest “longevity insurance” money can buy. According to Team BMT Analysis, unless you are in poor health, the Bridge Strategy is mathematically dominant. Source: Social Security Administration / J.P. Morgan Asset Management
Scenario: You retire at 62. Primary Insurance Amount (PIA) at 67 is $3,000/mo.
- Option A (Claim Early at 62): Benefit reduced by 30%.
Monthly Check: $2,100.
Risk: Inflation eats this value alive by age 85. - Option B (The Bridge to 70): You withdraw $3,000/mo from your IRA to live. Claim SS at 70.
Benefit Growth: +24% from delayed credits (3 years * 8%).
Monthly Check at 70: $3,720. (77% higher than age 62 payout).
Result: You swapped a volatile asset (IRA) for a guaranteed, growing income stream.
BMT Verdict: Social Security is not an investment account; it is longevity insurance. The goal is not to “break even” if you die at 78. The goal is to maximize income if you live to 95. The Bridge Strategy protects the “Old You” at the expense of the “Young You.” This is prudent risk management.
Cumulative Payout Comparison
| Age of Death | Total Lifetime Payout (Claim at 62) | Total Lifetime Payout (Claim at 70) |
|---|---|---|
| 78 (Breakeven) | 403000 | 403000 |
| 95 (Long Life) | 831000 | 1116000 |
*Chart Note: The “Breakeven” is usually around age 78-80. If you live past that, the Bridge Strategy generates hundreds of thousands of dollars in excess wealth. For a married couple, the survivor benefit rules make delaying the higher earner’s benefit even more critical.
COLA Reality: In 2023, Social Security recipients received an 8.7% COLA (Cost of Living Adjustment). Commercial annuities usually have 0% or fixed 2-3% adjustments. Social Security is the only asset that fully tracked the post-COVID inflation spike. Maximizing this base is the best hedge against future inflation shocks.
โ BOUNDARY CLAUSE: This Structure Breaks Down If:
- Poor Health: If you have a diagnosis limiting life expectancy to < 75, claim early. The Bridge Strategy relies on living long enough to harvest the credits.
- Single & No Heirs: If you are single and don’t care about “running out of money” at 95, spending your portfolio down might feel psychologically risky.
- Liquidity Crisis: If spending your IRA from 62-70 drains 100% of your liquid assets, don’t do it. You need an emergency fund.
Execution Protocol
From age 62 to 70, your income is artificially low (no wages, no SS). This is the “Tax Valley.” Withdraw from your Traditional IRA to fund the bridge. This reduces your RMDs later and fills up the low tax brackets (10%, 12%) now.
For married couples, the higher earner MUST delay to 70. Why? When one spouse dies, the survivor keeps the higher of the two checks. Delaying the big check creates a larger “Survivor Benefit” for the widow(er).
Note: Old strategies like “File and Suspend” were eliminated in 2015. Now, you simply wait. Do not file. Just spend your own money.
This strategy requires psychological fortitudeโwatching your portfolio balance drop while your friends collect government checks. But structurally, you are increasing your net worth’s “guaranteed floor.”
WEALTH STRATEGY DIRECTIVE
- Do This: Use the “Bridge Years” (60-70) to perform Roth Conversions on top of your spending withdrawals. Fill the 22% or 24% bracket to the brim before RMDs and SS kick in at 73/70.
- Avoid This: Claiming SS early just to invest it in the stock market. You are trading a guaranteed 8% return (SS growth) for a risky 7-10% return (Stocks). That is bad arbitrage.
Frequently Asked Questions
What if SS goes bankrupt?
Even in the worst-case scenario (Trust Fund depletion in 2033), benefits are projected to be cut by ~20%, not 100%. A 20% cut to a maximized Age 70 benefit is still better than a 20% cut to a reduced Age 62 benefit.
Can the lower earner claim early?
Yes. A “Split Strategy” often works best. The lower earner claims at 62 (cash flow now), and the higher earner waits to 70 (longevity/survivor protection).
Is the 8% growth simple or compound?
It is simple interest based on the PIA. However, the COLA adjustments compound on top of it. The effective combined growth rate often exceeds 8% annually in nominal terms.