Strategies for Funding Delayed Social Security Income

It seems simple and obvious: for every year a person postpones claiming their Social Security check beyond their full retirement age (FRA), benefits will increase by 8% per year until age 70, at which time one must begin receiving benefits. This could potentially be a 32% increase and the increased COLA (cost of living adjustment) to go along with it- a no brainer!1

The question is: how do you supplement your income until that time?

Keep working. One option is to keep working.  Back in the day, people just didn’t retire.  There was no Social Security to replace wages.  Granted, life expectancies were much shorter, but people worked as long as they had to to support their families.  While this is certainly not the answer for everyone, working longer, in a job or profession you love, may give more than a paycheck.  It can provide meaning and purpose to one’s life, keep you mentally and socially engaged and even physically active. Too many individuals retire far too early and don’t know how to fill their days with meaningful activities.  It’s very common to feel displaced and get depressed.  Do what makes you happy and if that’s work, then so be it, as long as you take plenty of time along the way to spend with loved ones and have some fun.

Divide and Conquer. One strategy for married couples is to divide and conquer.  It may be beneficial to delay the primary earner’s benefit to 70 and claim the spouse’s smaller Social Security check to create some cash flow.  This would also translate into a larger survivor benefit for a surviving spouse.

Tap retirement savings. Another option is to consider tapping retirement savings for the first few years before claiming Social Security benefits.  A software program that we use, Social Security Solutions, has consistently illustrated that using retirement savings first, then scaling back after Social Security is turned on, may extend a portfolio’s longevity by up to seven years.  Delaying that Social Security check could provide a pretty decent  rate of return from an investment perspective.  This, of course, is relative to market conditions, and tax implications of the draw down from taxable or tax-deferred accounts.

Tap other equity. An option that may be suitable, and is often overlooked, is tapping some of the equity in your home by using a reverse mortgage. An added advantage here is that reserve mortgage payments are usually not taxable.  This may also be a viable option for someone with little financial assets who has most of their  net worth tied up in their home. If you decide to consider one, do your homework and compare the different types of reverse mortgages to see if this might be the right strategy for your situation. And please don’t be worried about what you are leaving the kids.  They want you to have a good life.  What’s the difference if you leave them a house free and clear or you leave them other financial assets.  It’s a lot easier to liquidate or keep an investment account than it might be to sell a house and split the proceeds with siblings.

So there are quite a few strategies to help supplement your cash flow while waiting to turn on Social Security.  Just remember, this decision is not a one size fits all. Let us help you figure this one out and see what makes the most sense for your situation.  Call us at (732) 364-5462.

Written by Kathleen Nolan, CRPC®

Kathy Nolan is a Charted Retirement Planning  Counselor and holds the CRPC® designation from the College of Financial Planning


We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

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