The 'Wait-to-Win' Rule of Retirement Spending
How trading your savings today will give you a permanent raise tomorrow.
The average retirement age is around 62, but if you stop working then and begin collecting Social Security benefits, your monthly payments can be reduced by up to 30% over your lifetime.
That could be a big deal later in life if you need extra money to cover your healthcare or to assist you in your daily tasks.
One way to ensure you get the most Social Security benefits is to delay filing. That doesn't mean you can't retire. It does mean you have to find other sources of income to bridge the time until you are eligible for all of your Social Security benefits.
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Call it the "Wait-to-Win" rule of retirement spending. With it, you trade some of your savings today to secure a higher, inflation-protected, permanent raise tomorrow. The longer you wait to start collecting Social Security, the more you stand to get.
After all, every year you delay collecting beyond your full retirement age (FRA), which is 67 for those born in 1960 or later, you'll get an 8% bump in your annual payments.
"It could be a powerful strategy but also a very selective one," said Quincy Goudeau, wealth advisor and founder of Goud Steward Advisors. "Most people thinking through whether or not to do it have to consider if they have longevity in their family and the financial flexibility."
The 'Wait-to-Win' rule in practice
Consider the following scenario as an example of the impact the "Wait-to-Win" rule of retirement spending can have on monthly cash flow. Our example assumes the average Social Security monthly payment by age, keeping in mind that every situation is unique.
Claim at age | Monthly benefit | Delay advantage |
|---|---|---|
62 | $1,455 | N/A |
67 (full retirement age) | $2,080 | $625 per month |
70 | $2,580 | $1,125 per month |
Who wouldn't want an extra $1,125 per month in benefits?
It's not for everybody
Despite the larger benefit from delaying, the "Wait-to-Win" strategy isn't for everyone. It works best for retirees who have enough savings to last until their full retirement age and who don't have serious healthcare issues that could affect their lifespan. After all, what's the point in delaying collecting Social Security benefits if you aren't around to use them?
It's also not for those who will lose sleep worrying that Social Security will go bankrupt in the years to come. While that isn't likely to happen, the Old-Age and Survivors Insurance Trust Fund, which pays out Social Security benefits, is projected to run out of money in the first quarter of 2032. If nothing is done by then, benefits would be cut by 23%, and beneficiaries would receive 77% of their benefits.
"I have been doing this for 20 plus years, and I've had this conversation 20 years ago, and it's still being had today," says Goudeau. "It is hard for me to believe that any party or any politician will vote to end Social Security or change it dramatically."
Use the 'Wait-to-Win' rule if you think you'll live long
If you have a family history of living well into your 90s, this strategy can give you peace of mind knowing you'll have a higher level of inflation-protected steady income throughout your lifetime. You won't have to worry about running out of money as you age or relying solely on your own savings to fund your later years.
Let's assume you earn the maximum Social Security benefits and claim at 62, 67 or 70. This graphic from J.P.Morgan Asset Management shows how you could receive up to $500,000 more in your lifetime as a maximum earner and with a lifespan of 90 years. It also demonstrates the "breakeven point," in other words, how long you would need to live for the higher monthly benefit to offset the payments you skipped by claiming late.
As the graphic shows, it is also important to account for your spouse's Social Security strategy and potential lifespan.
"With this, you give yourself a raise when you need it most," says Steve Parrish, professor of Practice, Retirement Planning at The American College of Financial Services. "Even though you are in the slow-go years, it's insurance in case you have to go into assisted care or your healthcare costs go up."
The strategy complements working in retirement
"Wait-to-Win" also makes sense if you plan to consult or work part-time in retirement, since Social Security penalizes you if you earn more than a specific amount per year in retirement before you reach full retirement age. For 2026, the cap is $24,480. After that, for every $1 you earn, you lose $2 in benefits.
The loss is temporary. Once you reach full retirement age, Social Security recalculates your benefits. By waiting until your full retirement age to claim, you bypass the earnings test entirely. You get to keep every dollar of your paycheck and secure your higher, lifetime Social Security benefit.
There's also a tax benefit to this approach, noted Parrish. It can help you avoid the so-called tax torpedo, which occurs when you have to pay taxes on a portion of your Social Security when your income in retirement exceeds more than $34,000 for single filers and $44,000 for those filing jointly. Without Social Security, you may not have to worry about that, he says.
There's no right or wrong approach
Deciding when to claim Social Security is one of the biggest decisions you'll make in retirement. The "Wait-to-Win" strategy can help you have a bigger permanent paycheck later, but it does come at a cost early on.
For some, claiming early is the right choice because it provides the immediate cash flow needed for a comfortable, active retirement or peace of mind during health challenges. For others, holding off is a strategic move that turns savings into long-term insurance against outliving their money.
Your cash flow, savings, longevity and risk tolerance all come into play when determining which approach is right for you.
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