IRA First, Social Security Last: A Six-Figure Retirement Strategy
Retirees with $500K may gain six figures by drawing IRAs early and delaying Social Security, a sequencing strategy worth knowing.
Retirees sitting on roughly $500,000 in savings could add six figures to their lifetime income simply by reversing the order in which they tap their accounts, according to a strategy highlighted by Yahoo Finance. The core idea: draw down traditional IRA funds first in the early years of retirement, then delay claiming Social Security benefits as long as possible — ideally until age 70.
The logic behind the approach hinges on two compounding advantages. Spending from a tax-deferred IRA early, while income is relatively low, can reduce required minimum distributions later and keep retirees in lower tax brackets. Meanwhile, every year Social Security claiming is delayed past full retirement age — up to age 70 — increases the monthly benefit by roughly 8%, a guaranteed return that no market investment can reliably match.
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For a retiree with $500,000 saved, the difference between claiming Social Security at 62 versus waiting until 70 can translate into hundreds of dollars more per month for life. When stretched across a decades-long retirement, that gap compounds into a six-figure differential in total lifetime benefits — a meaningful cushion against longevity risk and inflation.
The strategy does carry trade-offs. Retirees must have sufficient assets to cover living expenses during the delay window without Social Security income, which requires disciplined planning and cash-flow management. Sequence-of-returns risk in the early retirement years, when IRA withdrawals are highest, also demands careful attention to portfolio allocation.
Financial planners generally caution that the optimal sequence varies by individual circumstances — health, marital status, other income sources, and tax situation all factor in. But for the broad middle tier of American retirees with mid-six-figure nest eggs, the spend-IRA-first framework offers a structured, evidence-backed way to maximize lifetime income. Continue reading at Yahoo Finance.
