How to Create an Income Bridge to Delay SS

Are you retiring early? Here’s how to create an income bridge between your early retirement date and Social Security claiming date.

For many, retiring early is the dream. But claiming Social Security at 62 results in a substantial permanent reduction in SS monthly payments compared to claiming at 70.  Remember: those SS monthly payments are guaranteed for life and inflation protected -- you want to maximize those if you can. For a married couple, the larger SS payment will continue as long as either partner is alive, so it is doubly important to maximize the larger SS payment.

Key Question:  If you’re retiring at 62 (or even earlier), how do you cover living expenses for the 8 (or more) years until your Social Security benefits hit their maximum at age 70?

The solution:  Create a strategic Income Bridge.

Let's use an example of a couple, Chris and Jamie, who are retiring at 62 and want to delay Chris's SS benefit until 70 to maximize their guaranteed income for life. Here are three strategies they could use to comfortably bridge the gap:

1. Annuity Bridge:  Use a portion of their investment portfolio to buy a single-premium 8-year immediate annuity. This provides a steady, guaranteed monthly paycheck that can cover essential expenses until their Social Security benefits begin.  Even though CPI-linked annuities are not available today, they can buy an annuity with a fixed annual increase of 3-4% which will cover most of the inflation they will likely experience.

2. TIPS Ladder:  Use a portion of their investment portfolio to build a portfolio of 8 bonds (Treasury Inflation-Protected Securities), one maturing each year until age 70, providing predictable, inflation-adjusted income to cover their living costs.  Alternatively, they could build a certificate of deposit (CD) ladder of CDs maturing over the next 8 years, although CDs are not adjusted for inflation.

3. Portfolio Bridge:  Simply take larger withdrawals from their investment portfolio in their 60s and then reducing those withdrawals in their 70s and 80s. They can do this confidently, knowing that their much larger Social Security check will replace a bigger share of that income later on, and spending also typically declines in those later decades. For example, take 6-8% of their portfolio in the first decade and then 3% in later decades after SS kicks in.

Why This Works

By planning an “income bridge," you don't have to choose between retiring early and maximizing your benefits. You can cover today's needs while securing a higher, inflation-protected income for the rest of your life.

The Bottom Line

Delaying Social Security isn’t about "going without"—it's about planning smarter. With the right strategy, you can retire on your terms with a healthy income and build a more secure future. For more insight on the factors to consider in deciding when to claim Social Security, visit my blog post "When Is the Best Time to Claim Social Security?"

At FlourishingPath Financial Coaching, I help individuals and couples design personalized income-bridging strategies so they can retire early and claim Social Security at the optimal time. Contact me or visit www.flourishingpathfinancial.com/book-online to schedule a free Discovery Session.

Author:  John Macy, MBA, RICP®

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