Just because social security benefits don’t begin to kick in until your 60s doesn’t mean you should wait until a traditional retirement age (let’s say 62-65) before you make the big leap. Undoubtedly, if you’ve got the mortgage paid off and a sizeable enough portfolio to get you through the years before social security kicks in, you may just have the financial flexibility to embrace the FIRE movement (financial independence, retire early) with open arms.
In this piece, we’ll look at a married couple from Reddit in their mid-50s with a fairly generous amount of social security payments ($75,000 per year) waiting for them. While that benefit was substantial in late 2024, recent economic shifts—including the 3.9% April CPI-W print—have pushed analysts to project a 2027 COLA ranging between 3.9% and 4.2%.
That said, with many significant expenses (think the home and the child’s education) covered, it certainly seems like the couple has options, even in the years before they’re eligible to collect social security. Of course, only a financial adviser will have the answer for this couple as they look to wind down after a lengthy career.
Key Points About This Article
- A generous social security sum on the horizon doesn’t mean one’s in the clear to retire early.
- Rising inflation data and projected 2027 COLA increases of up to 4.2% are shifting the math for early retirees.
- Positioning one’s portfolio with an emphasis on passive income or a “COLA-adjusted cash buffer” can provide a bridge to 62.
- Also: Is your 401(k) optimized for your retirement plans? (Sponsored)
In this piece, we’ll review some ideas the couple may wish to run by their adviser as they weigh the pros and cons of early retirement versus sticking it out at work for just a few years longer. Undoubtedly, putting in the extra years would amount to a more comfortable retirement (think chubby FIRE versus traditional FIRE) rather than a modest one as savings and social security benefits amass.
That said, if the couple is feeling burned out, stressed, and unsatisfied with their work, counting down the days until their retirement date, perhaps it’s far better to retire sooner rather than later, even if it means fewer vacations and spoils to the kids and grandkids.
In any case, here are four questions I’d encourage the couple to bring up with their adviser:
Does it make sense to shift gears to passive income with the investment portfolio?
If one has a large enough investment portfolio, the couple may be able to make an earlier retirement work years before they choose to start receiving social security benefits. Undoubtedly, if such a portfolio can generate enough passive income to meet or even exceed the couple’s burn rate (their expenses in retirement), there’s the option to retire some years earlier.
For those retiring in 2026 or 2027, an advisor might suggest a “COLA Bridge” strategy, utilizing a cash buffer specifically adjusted for the 2.8% 2026 COLA and the upcoming 2027 projections to ensure purchasing power isn’t eroded before benefits begin.
Undoubtedly, I’ll assume the couple is invested in index or mutual funds rather than higher-yielding securities (think 4-5%-yielding dividend stocks), which would allow them to reposition with income in mind. Though going for yield over growth could make the numbers work for earlier retirement, the couple should consider the trade-offs.
How much could healthcare costs eat into one’s retirement income?
Unexpected care costs could quickly derail a seemingly sound retirement plan in its tracks. With the 2026 and 2027 HSA contribution limits rising, the couple should specifically evaluate how pre-Medicare private insurance premiums and Silver-level ACA plans impact their pre-62 budget.
A slew of insurance products (think long-term care insurance) can make sense if the couple is looking to ensure their nest egg has the staying power to last as long as they do. Additionally, there’s peace of mind that comes with not having to rely on one’s children to act as caregivers a few decades down the road.
What is the “opportunity cost” of retiring at 62 versus 70?
While $75,000 is a generous baseline, delaying benefits from 62 to the Full Retirement Age or age 70 can drastically increase the annual payout through delayed retirement credits. The couple should ask their adviser to model how the 2027 COLA projections compound over a longer delay, potentially turning a modest retirement into a “chubby FIRE” scenario with six-figure annual benefits.
In short, the couple seems to have solid footing as they gear up for an earlier retirement. However, unforeseen health expenditures and inflationary trends may eat into social security once the couple enters the middle of their retirement. Though products like long-term care insurance aren’t right for everyone, I do think they’re worth bringing up in a meeting with one’s adviser.
Editor’s Note: This article has been updated to include 2027 Social Security COLA projections based on recent CPI-W data, revised 2026/2027 healthcare contribution limits, the introduction of a COLA-adjusted cash buffer strategy, and a comparative analysis of the financial impact of delaying retirement until age 70.
Top Gaining Stocks
Top Losing Stocks