A Social Security bridging strategy involves spending from your assets after you stop working instead of taking your retirement benefit immediately.
There are pros and cons of this approach, but the benefits can be substantial. In particular, you might:
☑️ Maximize your retirement income
☑️ Reduce risk over the long term
☑️ Open the door to tax strategies
☑️ Possibly help improve things for a surviving spouse
☑️ And more
But there are no guarantees in life, and there are always tradeoffs. That’s true with a Social Security bridge, as well. For instance, you might be hesitant to spend down your assets while you wait. That’s understandable. And delaying benefits isn’t right for everybody. Whether you have health issues or you just want the income sooner than later, it could be appropriate to take benefits early.
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In this video, we explore how the strategy works, we cover some pros and cons, and we review a few tips for anybody who wants to use it.
More on this topic:
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Video on delaying Social Security:
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CHAPTERS:
00:00 Why Use a Social Security Bridge?
02:03 What Is a Bridge Strategy?
04:22 Unique Features of Social Security
04:47 Inflation Adjusted Payments
05:27 Lifetime Income
07:03 Benefits of the Bridge Strategy
08:30 Reduce Your Risk
09:29 Provide for a Surviving Spouse
10:38 Enable Tax Strategies
12:53 Potential Drawbacks
15:55 Tips for Using the Strategy
IMPORTANT:
It’s impossible to cover everything you need to know in a video like this. The only thing that’s certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. “Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration….(read more)
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Social Security Bridge: Maximize Income
Social Security is a critical component of financial security for retired individuals in the United States. It provides a steady stream of income to millions of Americans who have worked and paid into the system throughout their careers. However, navigating the complexities of Social Security can be challenging, especially when it comes to deciding the optimal time to start receiving benefits. This is where the Social Security Bridge strategy comes into play.
The Social Security Bridge strategy is designed to help retirees maximize their Social Security income by bridging the gap between their retirement and the age at which they can receive the maximum benefit amount. By implementing this strategy, individuals can take advantage of delayed retirement credits, which increase the benefit amount for each year that retirement is delayed beyond the full retirement age (FRA).
To understand how the Social Security Bridge strategy works, let’s consider an example. Suppose an individual’s FRA is 66, but instead of retiring at this age, they decide to postpone their retirement until the age of 70. By doing so, they can accumulate delayed retirement credits, which will increase their Social Security benefits by 8% each year.
In this scenario, the individual may wish to bridge the income gap between their FRA and the age of 70 to maintain their standard of living. They can achieve this by leveraging other sources of income, such as their retirement savings, investments, or even part-time work.
During the bridging period, the retiree can tap into their savings or investments to cover their living expenses. By doing so, they can delay claiming Social Security benefits until the age of 70, allowing their benefits to grow significantly through delayed retirement credits. In effect, the retiree uses their savings as a bridge until they reach the point where they can maximize their Social Security income.
The benefits of the Social Security Bridge strategy are twofold. Firstly, by postponing Social Security benefits, retirees can significantly increase the income they will receive during their retirement years. Secondly, depending on the retiree’s financial situation, they may be able to minimize the need to tap into their savings in the early years of retirement, preserving those assets for future needs.
It is important to note that the Social Security Bridge strategy may not be suitable for everyone. Factors such as the retiree’s health, financial stability, and other sources of income should be considered when deciding to implement this strategy.
Additionally, the Social Security Bridge strategy is just one of many approaches to optimizing Social Security benefits. Each individual’s circumstances are unique, and seeking professional advice from a financial planner or Social Security specialist is highly recommended before making any decisions.
In conclusion, the Social Security Bridge strategy offers a way for retirees to maximize their Social Security income by bridging the income gap between their full retirement age and the age at which they can claim the maximum benefit. By leveraging other sources of income during this bridging period, retirees can delay claiming Social Security benefits and take advantage of delayed retirement credits. However, it is crucial to consider personal circumstances and seek professional advice to determine if this strategy is suitable for individual financial goals and needs.
felt like i watched 50 of these kinds of videos before someone actually broke down where the market real (not avg) return would have to be for it to make more sense to claim early & leave your $ invested. the magic # according to the author was 5.5%. iow, if your investments make more than 5.5% then u would be wiser to take SS early, letting your investments grow. historically the market has done well north of that # so it seems this would be wiser for a lot of retirees. all that said, i keep trying to find rationale for waiting as long as possible to take SS simply cuz i like the idea of it. still 5-6 years from retirements but will probably take it early, let my investments grow, doing roth conversions where they make sense, then use a 2-3 bucket strategy when i start to draw down my investments. surely want to have enuf out of the market at any given time so that a sustained downturn doesn't cause undue havoc. now if only we could get CDs/tbills/etc (post-tax) to match/outpace inflation, wouldn't that be wonderful?
Excellent information. Probably the best explanation for waiting for your Full Retirement Age to take SS. Many great points made here. Thanks.
This all sounds great if you live long enough. But as they say, if you want to make God laugh, tell God you have made a plan. If your parents and grandparents lived into their 90s, this might have a benefit, otherwise delaying a year or two could be the better choice.
Uygh
I like the bridging strategy. You started off the video by using an example of retiring at 62 and drawing down retirement savings by the same amount you would have received at 62. Maybe you should have suggested to first dive in and really understand your monthly expenses. Paying yourself the SS payment out of savings may only be a drop in the bucket to what you really need to live on. Now, if you can live off your social security payment, fine but I seriously doubt it.
Social security is your money, you and your employer combined contribution, if you long enough, you might be able to tap into uncle Sam's pocket.
Question…As a spouse will my small social security check I am already receiving be larger when he retires and gets his check?
What amount (either percentage or dollar amount) would you recommend not falling below when implementing this strategy ???
If I took Soc at 62 $1600 x 3 = $50,000 then take Soc at 65 >$2000 my IRA wud still have >$300K Unless market Totally Crashes… ? I think Bridge is good strategy? I just wish I had put more money in my Cash Bucket? Wish have to tap into IRA 58/42 STOX AND bonds both Down 20% I am 60 Single in good health, will have Pension ot $1840 fixed, will not grow.
I'm 59, and I am planni ing on retirement at 65. Currently I sock away half my salery into roth Ira as well as roth 401k. I max out both. At 65 when I get medicare I can retire and take from my Ira just enough to cover the standard deduction so I'll pay no taxes, and live off of my roth ira. At 70 I'll collect social security.
Great information
This is exactly what I planned to do! Had no idea it was an official strategy lol. I think for tax reasons I'm going to have to. I'll be 401k heavy.
Seems like a good strategy for single folks with no heirs to leave money too.
Great video … for me, i want to do all i can to see to it my wife will be in as good as a position as possible if i were to prematurely pass … planning on using this strategy, but will also consult a PROFESSIONAL to make sure i take full advantage of the strategy. Thank you !
Vaguely right but precisely wrong? Yikes!
Very informative presentation. I plan to retire sometime between 60 and 62 and live on investments until 70, and probably also do 1 or 2 Roth conversions in the early years as well. I'll stick to this plan as long as my health and vitality remain strong. If my health deteriorates unexpectedly, I will adjust, but I expect to live a long healthy life (knock wood). Even though I have a pretty clear idea of what I will do, I still plan to consult a fiduciary as I close in on retirement. A set of expert eyes certainly can't hurt.
This can be a great strategy for those with modest portfolios and minimal legacy goals.
We are doing a slightly customized version of this.
Obviously if you need to work to delay SS, it is a completely different discussion, however maximizing the higher earner check has huge advantages for most, so there are some in between strategies.
From a risk perspective, maximizing SS and spending down the portfolio to do so has numerous advantages.
Social security despite all the issues is still the least risky and highest returning low risk asset out there, and it is a pretty sure thing for current retirees
Great information! I am 58 years old and may go this way I just need to tweek some things.
One important variable to back of napkin analysis is life expectancy. To me, a desirable bridge strategy for those who saved for retirement while working when comparing 62 to 67 is to work longer. If one may work just 2 more years until 64 to retire and claim SS, the SS break even taking into account the earnings for those 2 add’l years would be much closer to a healthy person’s life expectancy. One who prioritized retirement savings while working may then also be in a great spot to have retirement income between 70-100% with inflationary adjustments of their final salary until their life expectancy date of death. If one lives longer, they will likely still be ok and way better off than most.
Thakyou for Great Information
Great video, appreciate review of both positives and negatives of this strategy. Biggest difficulty now is locking in losses … we have 2 years expenses saved in cash so will spend that until market comes back, then use 401k bridge. in those 2 years will do roth conversions also. We've been giving our kids their inheritance "up front" in yearly gifting so that's not as big a concern.
Thanks for the video!
Thanks Justin. Excellent content. This helps to bolster my confidence in this strategy.
good stuff!
Great job! Thank you!
just take it at 62 …. its not worth it to wait
Great video! Nice to see what I have been following for 2 years.
Excellent and helpful content, thanks very kindly, Justin!