Why Claiming Social Security at 70 Can Double Your Withdrawal Rate

Added: 2026-04-29

[00:00:00]What if I told you spending more from your portfolio in your 60s could actually make your retirement safer? It sounds completely backwards because most of us think that the less we withdraw from our portfolio in those early years of retirement, the safer our plan will be, but retirement researchers have found something interesting. In many cases, delaying social security can actually increase the safe withdrawal rate of a portfolio. So in other words, a retirement plan can become more sustainable over time, even if you're having your portfolio carry more of the weight early on. This insight shows up repeatedly in the research of economists and retirement specialists like Wade Fowl, David Blanchett, and Michael Kitsies. And once you start to understand the mechanics behind it, the logic starts to make a lot of sense. Hey guys, what's up? I'm Aaron and welcome back to the channel. In this video, we're going to walk through something incredibly important for retirement planning. how Social Security claiming age interacts with withdrawal rates, why flexible spending dramatically changes the math, and why delaying benefits can sometimes make a retirement plan more resilient. A safe withdrawal rate tells us how much income a portfolio can support. But social security determines how much income that portfolio needs to provide in the first place. So in other words, these two decisions interact directly. Earlier social security claiming usually means a smaller guaranteed lifetime benefit, more pressure on the portfolio, and a lower long-term income floor. Later claiming typically means a larger inflationadjusted lifetime income stream, less dependence on portfolio withdrawals later, and stronger protection against longevity risk. even though it may require spending more from the portfolio early on. A few numbers help to put this into perspective.

[00:01:53]Claiming at 62 reduces benefits by about 30% relative to full retirement age.

[00:02:00]Delaying beyond full retirement age increases benefits 8% per year until age 70. For someone with a full retirement age of 67, the benefit at 70 can be roughly 75 to 77% higher than claiming at age 62. That is an enormous change in the size of the guaranteed income floor.

[00:02:23]And that change has major implications for portfolio withdrawals. Before we go any further, it's important to say something very clearly. There are many factors that go into deciding when is the appropriate time for you to claim social security. Your health, your life expectancy, whether you're married, your need for income today, tax implications, whether you're still working, and of course, the size of your portfolio. And because of that, there is no single correct age to claim social security.

[00:02:54]Some people absolutely should claim earlier. Others benefit from delaying.

[00:02:58]The goal of this video is not to tell you the right age to claim. The goal of this video is to help you understand the age at which you claim social security will absolutely influence what is considered a safe withdrawal rate from your portfolio. And one of the best ways to see how this works is through an example. So let's do our first example with a retiree who has significant assets built up. Imagine a retiree with a $1 million portfolio. They retire at age 62 and decide to delay social security until age 70 to allow the benefit to grow as much as possible.

[00:03:32]Now, yes, this decision will absolutely put more pressure on the portfolio in the short term. But once social security begins at a later date, that portfolio will carry a lot less pressure for the remainder of retirement. Here's what it might look like. Assume our retiree has a $1 million portfolio. They have desired annual spending of $60,000 per year. If they had claimed social security at age 62, it would bring in $30,000 per year. In that scenario, their portfolio would need to provide just $30,000 per year. But if they delay social security until age 70, the portfolio must fund the full $60,000 per year for the first eight years of retirement. At first, that sounds risky, but let's factor in normal market growth. We'll assume our retiree has an equityheavy portfolio and assume they can capture a long-term average annual rate of return of 7% after inflation.

[00:04:31]Here's what happens if the retiree withdraws $60,000 per year while earning 7% annually. Notice that the withdrawal is actually less than the growth the portfolio experiences after 8 years of withdrawing. $60,000 per year. The portfolio is actually larger than when retirement began. Now at age 70, Social Security begins and compared to claiming at age 62, according to the Social Security Administration, their benefit would now be 75 to 77% higher at age 70.

[00:05:07]So rather than receiving $30,000 a year, which is what their benefit would have been at age 62, they might be receiving $53,000 a year. Now, the portfolio only needs to cover about $7,000 per year.

[00:05:20]The burden on the portfolio has dropped dramatically. So, even though our retiree withdrew $480,000 over those 8 years, they still arrive at 70 with a larger portfolio, a larger social security benefit, and lower withdrawal needs for the remainder of their entire retirement. This pattern shows up frequently in simulation research from retirement experts. So delaying social security can reduce long-term pressure on the portfolio even if the withdrawals are higher earlier on. Recent research from Morning Star estimates that a fixed inflationadjusted withdrawal strategy today supports a starting withdrawal rate of roughly 3.9% for a 30-year retirement. But that estimate assumes rigid spending an inflation adjustment every single year and no adjustment based on market performance. Once we introduced some flexibility, the estimate changes dramatically. Research from Jonathan Gton and William Clinger shows that guardrail strategies where spending adjusts slightly when markets move can support starting withdrawal rates closer to five or 6%. This is why you so often see such a wide range of withdrawal estimates when you look at retirement research. They are modeling different behaviors. When we combine social security timing with different withdrawal frameworks, something interesting emerges. Here's a simplified way to think about it. If you retire at age 62, an ultra-conservative model might suggest you could withdraw anywhere from 3.3 to 3.6% of your portfolio and be considered safe. But if you're willing to follow a flexible or guard rails approach, you might be able to withdraw up to 6% of that portfolio.

[00:07:05]Let's fast forward to full retirement age, age 67. Following the traditional 4% rule, you might be able to withdraw 4% or even slightly above that for your portfolio sustainably over time. If you're following William Benin's most recently updated research, you might be able to stretch that to 4 1/2 or 4.7%.

[00:07:26]And if someone delays claiming all the way up to the age of 70, you could see that depending on the approach they are following, they might be able to start with a withdrawal rate in the range of 4% or even closer to 7%. Notice the pattern. As social security is delayed and as that guaranteed income stream increases, the portfolio can support a higher withdrawal rate over time. And that's simply because the portfolio itself is responsible for less of the total lifetime spending. Let's take a moment and talk about these withdrawal rates because different withdrawal frameworks assume very different behaviors. If you're following a conservative model, this is assuming fixed spending absolute worstcase forecasts. We're basically running off Monte Carlo simulations. If you're following the standard 4% rule, this is a historical stress test. The worst conditions we have ever seen in history.

[00:08:24]If you're following Benin's updated research, this considers a broader asset class mix. So, generally, it can support slightly higher withdrawal rates. And if you're following a guard rails approach, this gives you spending that adjusts with the market. So, it supports higher withdrawal rates. Once you adopt flexible spending, you'll see that the safe withdrawal rate increases dramatically. And it's very important to understand the assumptions that go into each approach. That way, you can pick a withdrawal rate that works with your life and your portfolio. Now, here's something really interesting. Even the withdrawal rates we just discussed, they might be a bit conservative. And there's three important reasons for that. First, retirement horizons are often shorter than the models assume. Many retirement simulations are built around a 30-year retirement. Some even stretch retirement to being 35 or 40 years. But in reality, the typical length of a retirement is about 20 to 25 years. And when retirement time horizons are shorter, portfolios simply don't need to last as long, and that translates to being able to support higher withdrawal rates.

[00:09:34]Second, spending usually declines in real terms as people age. spending tends to be higher earlier on in retirement.

[00:09:42]When people have more time, more health, and simply more flexibility, and they want to enjoy those early years of their retirement, then spending tends to naturally decline as we go into those middle years of retirement, and life tends to slow down a bit. And some people tend to experience an uptick later on in retirement with healthcare related spending. And that natural decline in spending through those middle years of retirement naturally reduces the pressure on a portfolio and makes portfolios more sustainable over the long term. And the third reason is something we really can't ignore. Human behavior. In the real world, retirees do not follow rigid spending rules. Rather, when the market tumbles, they may tighten their belt a little bit. They may decide to delay a trip or postpone a large purchase or cut back on discretionary expenses. And when markets perform well, they may allow themselves to spend more. This happens all the time. People react to what is happening around them. And very rarely do we see retirees increase their spending every single year by the exact amount of inflation. Rather, what we tend to see is that spending tends to decline in real terms over time. This flexibility that we see among retiree spending, which is simply reflective of normal human behavior, dramatically reduces the risk of sequence of returns, which is one of the biggest risks to retirees early on. When we step back and factor in real human behavior, when we see that retirement time horizons are often shorter than what the model suggests, when we look at this decline in spending over time, when we see that retirees adapt to the market and the world around them, this is why retirement researchers often say that safe, sustainable withdrawal rates are often significantly higher than what the conservative models would suggest. Now, we previously did an example where we looked at someone with a large portfolio. But the interesting thing with social security timing is that it can matter just as much or sometimes more to a retiree who has modest savings. So, now let's consider a different type of retiree. Imagine someone who has $75,000 saved by age 62.

[00:11:59]Their estimated Social Security benefit at full retirement age is $2,000 per month. So that means if they claimed early at age 62, they might receive about $1,400 a month. And if they delayed all the way until the age of 70, they might receive a little bit over $2,400 per month. Those numbers come from the standard social security reductions and delayed retirement credits. If this individual tried to retire at 62 with their modest portfolio, even using a flexible spending approach, giving us an aggressive withdrawal rate of 6%, this would only produce about $4,500 per year from that portfolio. That combined with social security at 62 would give them an income of a bit over $21,000 per year.

[00:12:45]Let's be honest, most people would not feel comfortable retiring on that income. So instead, let's say our individual decides to work until the age of 70. And throughout these next eight years, they're going to save aggressively. They didn't save earlier on in life, so now they need to catch up for it. They're going to save $1,000 per month. And we'll assume that they can capture a 7% annual return on their investments. By 70, their portfolio could grow to about $252,000.

[00:13:12]Now, Social Security begins at that larger delayed amount, about $2,480 per month or just under $30,000 per year. If they use a flexible and now higher withdrawal rate of about 6.8%, their portfolio could provide about $17,000 per year. Now, their total retirement income becomes about $47,000 per year. In other words, delaying social security combined with continuing to work and continuing to contribute to their savings and their investments completely transforms the outlook of their retirement. These examples do something important. They showed that delaying Social Security doesn't just increase your monthly benefit, it can strengthen your entire retirement plan because a larger Social Security benefit gives you a larger guaranteed inflationadjusted lifetime income stream. And that dramatically reduces the pressure on your portfolio over the course of your entire retirement. And that really brings us back to the heart of this video. when you claim social security can significantly influence what withdrawal rate your portfolio can safely support. Two things happen when someone delays social security. First, the timing of withdrawals shifts. If someone retires before claiming social security benefits, their portfolio very well may need to cover a greater share of their retirement spending simply because these checks haven't started yet. And at first, this can sound risky.

[00:14:41]But the second effect is really what matters. when social security benefits begin. And if those benefits were delayed, that monthly check is higher.

[00:14:51]And that larger benefit can cover a much bigger portion of a retireese spending for the rest of their life. Which means their portfolio may only need to cover a smaller share of their entire retirement spending. And this is especially important when longevity risk comes into play as retirement goes on. In some cases, delaying Social Security means living off your investments early. In other cases, it means continuing to work and continuing to contribute to your savings and investments and allowing them to become a bit more robust and allowing this portfolio to grow. Either way, together, these effects can significantly reduce the long-term pressure on a portfolio. The biggest financial risk retirees face is running out of money late in life. This risk is primarily driven by longevity, inflation, and sequence risk. Delaying Social Security directly addresses those risks because it increases the amount of income that is guaranteed, inflation protected, and completely independent of market performance. Research from Vanguard describes delayed claiming as a way to create a higher floor to consumption and reduce the probability of outliving assets. Another analysis from the bipartisan policy center and Black Rockck found that delaying retirement and social security claiming from age 65 to 67 increased modeled lifetime spending by 16% and reduced downside risk by 15%. Those are significant changes to retirement outcomes by just a 2-year delay. And all of this leads to a very important takeaway. There isn't a single safe withdrawal rate that applies to everyone. It depends on many factors, including when you claim social security, what your investment allocation looks like, how flexible your spending is, and how long you expect to live. Someone retiring and claiming Social Security at age 62 following rigid spending really might be only able to support a sustainable withdrawal of, say, 3.5%.

[00:16:55]Someone else retiring at age 70 and willing to use a flexible approach really might be able to use a safe withdrawal rate closer to 7%. That's over a 70% difference in sustainable lifetime income from a portfolio. One helpful way to think about delaying social security is this. You are essentially using part of your portfolio in your 60s to purchase a larger inflationadjusted pension. And once that pension begins, your portfolio's job is now easier. And that is why delaying benefits can make your plan stronger over time, even if you had more significant draws early on in retirement. For married couples, this effect can be even stronger. When the higher earnner delays when they claim social security, this higher benefit ultimately will become the survivor benefit later in life. And that means the surviving spouse has greater protection for the rest of their life.

[00:17:49]And again, this dramatically reduces the risk that someone living into their late 80s or 90s would have to heavily be drawing on their portfolio. So when we talk about safe withdrawal rates, we often focus entirely on the portfolio.

[00:18:03]But the reality is that social security timing is one of the most powerful levers in retirement planning. It can strengthen the entire retirement plan by increasing your income that doesn't depend on market performance and having a stronger retirement plan can ultimately increase the sustainable withdrawal rate that your portfolio can support. So, what are your thoughts on how social security timing and safe withdrawal rates interact? I'd love to hear. Leave them down below. I post new videos every single week. If you got anything at all out of this one, please give it a like. If you're new here, please consider subscribing. Or if you know of someone who might get something out of this type of content, please consider sharing. I'll see you soon.

[00:18:46]Bye. Who has significant retirement assets. I think there was a weird weird pause. Okay. Instead of claiming at age 62, they would now. [clears throat] So, even though our retiree withdrew about I think I had a weird breathing thing in there. Having a cold is not helping me at all.

[00:19:06]I've been sick for like 11 days at this point. I need my toddler to get better so I can [music] get better. Spending tends to be highest earliest or highest earliest. I'm not saying that. I'm not saying highest earliest. Not doing it.

[00:19:19]Rephrase. Not sure how to rephrase it.

[00:19:21]We'll figure it out. [laughter] Spending spending [music] tends to be higher earlier on in retire. Is it really highest earliest? And now I'm doing higher earlier. I don't think that's better either.