Small timing decisions in Social Security claims can mean thousands lost — or gained — for life

Rich Bean, President and CEO of The Retirement Advisors in Manchester, NH, has spent more than three decades advising retirees from major employers including AT&T, Verizon, Lockheed, and Raytheon on how to protect and grow their income after leaving the workforce. In that time, few decisions have proven more consequential, or more frequently mishandled, than when to claim Social Security benefits.

The difference between claiming at 62 and waiting until 70 can exceed $100,000 in lifetime benefits for a typical retiree. Yet most people make the decision without running the numbers, and many do it under the mistaken belief that claiming early is always the safer choice.

Why Early Claiming Is Often the Costliest Move

Social Security benefits can be claimed as early as age 62, but doing so comes at a permanent cost. For every year a retiree claims before their full retirement age (FRA), which is 67 for anyone born after 1960, the monthly benefit is reduced by roughly 6.67 percent per year. Claiming at 62 instead of 67 produces a benefit that is 30 percent lower, every month, for the rest of the retiree’s life.

The argument for early claiming typically centers on the break-even calculation: if you claim early and invest the payments, does the compounded value eventually exceed what you would have received by waiting? For most retirees, the math does not favor early claiming beyond the mid-to-late seventies, a threshold many people cross. According to the Social Security Administration, the average 65-year-old American can expect to live into their mid-eighties. A retiree who lives to 85 and claims at 62 instead of 70 will almost certainly have left a significant sum uncollected.

Bean works with clients approaching retirement to model both scenarios using their actual projected benefit amounts and realistic longevity assumptions. The goal is not to find a universal answer but to find the right answer for each household, because income sources, health history, and spousal benefits all change the calculus.

How Social Security Gets Taxed and What to Do About It

One of the least understood aspects of Social Security planning is the taxation trigger. Benefits are not automatically tax-free. Once a retiree’s combined income, defined as adjusted gross income plus nontaxable interest plus half of the Social Security benefit, exceeds $25,000 for single filers or $32,000 for married couples filing jointly, up to 50 percent of the benefit becomes taxable. Above $34,000 for single filers and $44,000 for married couples, up to 85 percent becomes subject to federal income tax.

For retirees drawing from multiple income sources, crossing those thresholds is easier than it looks. A pension from a company like IBM or Comcast, combined with IRA withdrawals and even modest investment income, can push combined income well past the 85 percent threshold before Social Security payments are factored in at all. The result is that the monthly check a retiree planned on receiving is materially smaller than projected.

The strategy Bean uses to address this is income sequencing. By drawing down taxable accounts in the years before Social Security is claimed, retirees can reduce the balance generating taxable interest and dividends. Delaying Social Security to 70 simultaneously increases the monthly benefit and shortens the number of years during which the retiree is most exposed to the taxation threshold. The two moves work together to produce more after-tax income across a retirement horizon.

The Spousal Benefit Calculation Most Couples Overlook

For married retirees, Social Security planning involves two benefit streams, not one, and the interactions between them are where most households leave money on the table. A spouse who earned less during their working years is entitled to a spousal benefit equal to up to 50 percent of the higher earner’s full retirement age benefit. This spousal benefit does not increase with delayed claiming beyond FRA, which changes the optimal strategy for lower-earning spouses.

The higher earner’s decision to delay to 70, however, carries a different implication. In the event of the higher earner’s death, the surviving spouse steps up to receive the deceased spouse’s full benefit, including any delayed retirement credits accumulated between FRA and 70. For a couple where the higher earner delays to 70, the survivor benefit is meaningfully larger than it would have been had that spouse claimed at 62 or 67. For couples with significant longevity on one side, this survivor protection is often the most important reason to delay.

Bean walks clients through the combined household Social Security picture before any claiming decision is made, modeling the impact of different claiming ages on both the current income stream and the survivor benefit. For retirees from major corporate employers where one spouse had a significantly higher salary and pension income, this analysis consistently produces a different recommendation than the default early-claim approach.

Coordinating Social Security With Other Retirement Income

Social Security does not exist in isolation. Its timing interacts directly with pension income, IRA withdrawals, required minimum distributions that begin at age 73, and investment income. A retiree who claims Social Security at 62 while also taking IRA distributions to cover living expenses is drawing down tax-deferred savings faster during the years when they could be growing, while simultaneously locking in a permanently reduced benefit. The combination accelerates the depletion of the retirement portfolio and reduces the monthly income base for the rest of their life.

A more coordinated approach, one Bean has used with retirees from companies including FedEx, UPS, and Amazon, involves drawing on taxable accounts and doing strategic Roth conversions in the early retirement years while delaying Social Security. This preserves the tax-deferred balance and allows the Social Security benefit to grow by eight percent per year between FRA and age 70, a guaranteed, inflation-adjusted return that no investment product can replicate.

The threshold where delayed claiming becomes clearly advantageous typically falls around age 80 for single filers and earlier for surviving spouses. For retirees in good health with a family history of longevity, the case for delay is strong. For those with serious health concerns or a shorter life expectancy, the calculus shifts. The point is that the decision deserves a real analysis, not a default.

Social Security is the one source of retirement income that is guaranteed, inflation-adjusted, and lifelong. The claiming decision is irreversible. A retiree who takes benefits at 62 without modeling the long-term impact of that choice against the alternatives is making a permanent financial commitment based on incomplete information. The households that get this right, those that coordinate their claiming strategy with their full income picture and longevity outlook, consistently end up with more monthly income, lower taxes, and better financial security in the decades that follow.

Rich Bean is the President and CEO of The Retirement Advisors, based in Manchester, NH. He has 35 years of experience advising retirees from major employers on Social Security planning, retirement income strategy, and tax reduction. Learn more at retirement-advisors.com.

Originally published at https://www.ibtimes.co.uk on May 5, 2026.

Rich Bean, President and CEO of The Retirement Advisors in Manchester, NH, has spent 35 years helping retirees restructure their finances after leaving the workforce. In that time, one pattern has repeated itself across clients from IBM, Raytheon, Amazon, Verizon, and dozens of other major employers: most retirees are paying far more in taxes than they should. In many cases, Bean has helped clients reduce their annual tax burden by as much as 50 percent, not through aggressive sheltering schemes, but through straightforward retirement income planning that most financial advisors overlook.

The Tax Problem No One Talks About Before Retirement

The years between retirement and age 73, when required minimum distributions kick in, represent a narrow window of opportunity. During this period, retirees often have lower income than they did while working, which places them in a lower tax bracket. Most people respond by doing nothing with that bracket space. That is a costly mistake.

The core issue is that tax planning does not stop at retirement. It changes shape. Retirees who spent decades deferring taxes into 401(k)s and IRAs often find themselves facing large taxable withdrawals later, precisely when Social Security income and RMDs combine to push their bracket higher. A proactive strategy, built during those early retirement years, can prevent that compression from happening at all.

Roth Conversions During Low-Income Years

One of the most reliable tools in retirement tax planning is the Roth conversion. When a retiree’s income drops after leaving work, the gap between their current bracket and the next one up becomes usable space. Converting a portion of a traditional IRA into a Roth IRA during that window means paying tax at a lower rate now in exchange for tax-free growth and withdrawals later.

Bean works with clients to calculate exactly how much to convert each year without triggering a bracket jump. A married couple filing jointly in 2025 can keep their taxable income below $94,050 and remain in the 22 percent bracket. Converting $20,000 to $30,000 per year over several years, rather than leaving the entire balance to compound and grow tax-deferred, can eliminate a significant portion of what would otherwise become a large RMD obligation at 73.

For retirees who held company stock in their 401(k), a related technique called Net Unrealized Appreciation allows them to take a lump-sum distribution of that stock at ordinary income rates on only the cost basis, with the appreciation taxed later at long-term capital gains rates, which are considerably lower for most households.

Reducing Taxes on Social Security Income

Many retirees do not realize that Social Security benefits become partially taxable once combined income, defined as adjusted gross income plus nontaxable interest plus half of Social Security benefits, exceeds certain thresholds. For individuals, the threshold is $25,000. For married couples, it is $32,000. Above those levels, up to 85 percent of Social Security benefits become subject to federal income tax.

The fix is not complicated, but it requires deliberate sequencing of income sources. By drawing down taxable accounts first in the years before Social Security is claimed, retirees can lower their combined income during the period when they are most exposed to Social Security taxation. Delaying the Social Security claim itself, often to age 70 to maximize the monthly benefit, further reduces the years during which partial benefits create a tax drag.

Bean has helped clients from large-company retiree pools, including Comcast, Coca-Cola, and FedEx, structure their withdrawal sequences specifically to keep combined income below the 85 percent threshold for as long as possible. The cumulative tax savings across a 20-year retirement can reach into the tens of thousands of dollars.

Asset Location as a Tax Reduction Strategy

Equally important is where assets are held, not just how much is saved. Placing income-generating investments, bonds, REITs, dividend-paying stocks, inside tax-advantaged accounts while keeping growth-oriented equities in taxable accounts allows retirees to minimize the income that triggers taxes each year. This approach, known as asset location, is distinct from asset allocation and is frequently ignored even by advisors who otherwise do competent work.

A retiree holding a bond fund in a taxable brokerage account pays ordinary income tax on the interest every year. That same bond fund inside a Roth IRA generates income that is entirely tax-free on withdrawal. The difference in after-tax return over a decade can be meaningful, particularly for retirees who are drawing on both account types simultaneously.

Bean combines asset location decisions with withdrawal sequencing and Roth conversion planning to build a coordinated retirement tax strategy rather than addressing each piece in isolation. The goal is to reduce taxes in the early retirement years while simultaneously reducing the taxable balance that will generate RMDs later.

Retirees who take a passive approach to taxation, simply pulling from accounts as needed without a structured plan, consistently leave money on the table. The strategies that reduce a tax bill by 30, 40, or 50 percent are not complicated once the mechanics are understood. They require accurate projections, careful timing, and a clear view of how each income source interacts with the others. For retirees looking to make their savings last and their income go further, that kind of planning is not optional. It is the foundation of a financially secure retirement.

Rich Bean is the President and CEO of The Retirement Advisors, based in Manchester, NH. He has 35 years of experience advising retirees from major employers on tax reduction, income planning, and estate strategy. Learn more at retirement-advisors.com.

Originally published at https://cioviews.com on May 4, 2026.