'Bridge' Your Way to Social Security

Delaying the start of Social Security benefits is a powerful way for retirees to cope with inflation, survive bad investment markets and reduce the risk they’ll run short of money.

The advantages of waiting are so great that financial planners often recommend their clients tap other savings, such as retirement funds, to help them delay claiming.

Employers could increase their workers’ financial security by offering a similar “bridge” strategy as part of 401(k)s and other workplace retirement plans, according to a study by the Center for Retirement Research at Boston College. The bridge strategy would tap a worker’s retirement account to pay amounts roughly equal to the foregone Social Security checks.

People can create such bridges on their own, of course. If Social Security projects your benefit at age 62 will be $1,500 a month, for example, you could set up automatic monthly withdrawals of that amount from your 401(k) at retirement. But having an employer offer the option could make the process easier and encourage more people to delay, says Gal Wettstein, the center’s senior research economist and co-author of the study.

THE BENEFITS OF WAITING ARE HUGE

Social Security benefits are incredibly valuable to retirees. Benefits are adjusted annually for inflation and, unlike retirement savings, can’t be depleted by bad markets, bad investing decisions or bad luck.

People can claim Social Security retirement benefits at any time from ages 62 to 70. Starting before your full retirement age, which is currently between 66 and 67, typically means settling for a permanently reduced benefit. Delaying beyond full retirement age, by contrast, increases retirement benefits by 8% each year until your benefit maxes out at age 70.