When Should Clients Claim Social Security Early?
- coreincomemarketing
- 1 day ago
- 3 min read
It’s often recommended that clients delay Social Security for as long as possible, and in many cases, this advice is sound.
But delaying Social Security is not universally optimal.
For certain clients, particularly those with little risk of outliving their assets, claiming benefits earlier can result in higher lifetime wealth, improved tax outcomes, and greater financial flexibility.
And it’s important to note that claiming early doesn’t have to mean spending early – it can mean extra funds to invest.
The key is understanding that the Social Security decision is not simply about maximizing the monthly check. It’s about balancing longevity risk against breakeven risk, and that balance looks different for every client.
In this article, we'll break down:
Longevity Risk vs Breakeven Risk
Longevity risk is the risk that a client lives longer than expected and depletes their assets.
This risk is most relevant for clients who are healthy, expect to live beyond average life expectancy, or rely heavily on Social Security as a primary income source.
Breakeven risk, on the other hand, is the risk that a client does not live long enough to benefit from delaying.
In this case, the higher lifetime payments from delaying never materialize, and the client would have been financially better off claiming earlier.
For clients with substantial assets and predictable spending, longevity risk may be minimal. In those situations, breakeven risk deserves greater attention, and early claiming may make sense.
Single Client Example: Early Claiming with Low Longevity Risk
Consider Mark, a single male investor evaluating whether to claim Social Security at 62 or delay until 70.
Client Profile
Age: 60
Estimated life expectancy: 85
Assets: $3.6 million
Spending: $78,000 annually
Claiming decision: Age 62 vs Age 70
Financial concern: Very low risk of outliving assets
Because Mark’s portfolio comfortably supports his spending, delaying Social Security primarily serves to increase guaranteed income later in life, something he doesn’t need.
When this situation was modeled, we found that Mark claiming Social Security at 62 would produce a higher median net worth throughout his 60s, 70s, and most of his 80s. The portfolio breakeven point would occur in his late 80s, which is several years beyond his life expectancy.
Claiming early would also reduce his reliance on tax-deferred withdrawals, leading to lower lifetime tax exposure.
In this scenario, delaying Social Security offers limited benefit because longevity risk is not a concern. Claiming earlier improves near- and mid-retirement outcomes while preserving flexibility, such as the compound growth achieved by reinvesting unspent income.
Married Clients: More Flexibility, More Complexity
Two-person households introduce additional layers of complexity (and opportunity) when evaluating Social Security strategies. Survivor benefits, health differences, and earnings history all play a role.
Importantly, the optimal strategy is often not for both spouses to delay.
Client Profile
Consider David and Susan, a married couple, both age 60.
Susan: Higher lifetime earnings, good health
David: Lower lifetime earnings, average health
Combined assets: $4.2 million
Annual spending: $85,000
Primary objective: Maintain flexibility while protecting the surviving spouse
When their situation is modeled, the optimal strategy has David claiming benefits early while Susan delays.
David’s early benefit helps cover household expenses and reduces portfolio withdrawals in the early retirement years.
Susan’s delayed benefit increases the survivor benefit, providing greater income protection if David passes before her.
Compared with a strategy where both spouses delay claiming, this coordinated approach results in higher expected lifetime wealth.
In other scenarios, such as when one spouse has significantly shorter life expectancy, the case for early claiming becomes even stronger for at least one partner.
Conclusion
Conventional wisdom suggests delaying Social Security as long as possible, and for many clients, that remains appropriate.
However, for clients unlikely to outlive their assets, early claiming may lead to better financial outcomes. Total portfolio value should be evaluated with the understanding that claiming early doesn’t have to mean spending early – it can mean extra funds to invest.
The decision on when to claim depends on longevity expectations, taxes, income sources, expenses, and household dynamics.
Because these trade-offs are nuanced, scenario-based financial modeling is often required to determine which risks matter most for each client.
Advisors who want to evaluate claiming strategies in greater depth, or stress-test assumptions across multiple scenarios, can reach out to our team for a comprehensive analysis tailored to each client’s unique situation.
800-541-7713
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