Why Wealthy Retirees Are Draining Their 401(k) Early to Lock In a Bigger Social Security Check at 70

A 63-year-old with $1.4 million in a traditional 401(k) who delays Social Security to 70 can collect $3,720 per month instead of $3,000 at full retirement age, but funding that delay through 401(k) withdrawals creates a tax problem that can offset much of the gain.

The Benefit Gap Compounds Over Time

For a high earner whose full retirement age benefit is $3,000 per month at 67, waiting until 70 produces $3,720 per month. That works out to $44,640 per year versus $36,000 at full retirement age, a difference of $8,640 annually. In nominal terms, over a decade that gap adds up to $86,400 before any cost-of-living adjustments are counted. Social Security COLAs are tied to the CPI-W index, with the most recent adjustment set at 2.8% for 2026. Each annual COLA applied to a larger base benefit translates into more dollars in absolute terms, which means the advantage of delaying widens further with every passing year.

A retiree who delays from 62 to 70 typically breaks even versus early claiming at around age 80 to 81. According to Social Security Administration data, the average 65-year-old man can now expect to live to about 84, and the average woman to about 87. For anyone in reasonable health, the odds of outliving that break-even point are quite good, which is why the math favors delay for most higher earners.

Using the 401(k) as a Bridge Reduces RMDs

Drawing the 401(k) down from 62 to 70 to cover living expenses funds the bridge period without requiring Social Security and reduces the account balance subject to required minimum distributions starting at age 73.

A $1.4 million 401(k) at 62, drawn at $60,000 per year for eight years with a 5% annual return on the remaining balance, arrives at age 70 carrying a smaller balance than one left untouched. That smaller balance produces smaller RMDs, which means less ordinary income forced into the tax calculation each year after 73. The withdrawals simply replace income the retiree would have needed anyway, reducing the taxable account balance without triggering a separate conversion event.

The Tax Cascade That Derails the Strategy

The bridge-withdrawal approach works cleanly only if annual 401(k) draws stay below two critical thresholds.

The first is the Social Security combined income threshold. Once provisional income (adjusted gross income plus half of Social Security) exceeds $34,000 for single filers or $44,000 for joint filers, up to 85% of Social Security benefits become taxable. During the bridge years before Social Security begins, this is not a concern. At 70, however, when both RMDs and the larger Social Security benefit arrive at the same time, combined income can push well into taxable territory.

The second threshold is IRMAA. Because Medicare uses a two-year MAGI lookback, a large 401(k) withdrawal at 65 affects Medicare premiums at 67. The 2026 IRMAA surcharge for a single filer begins at $109,000 in MAGI and adds roughly $1,150 per person per year at Tier 1 (Part B and Part D combined), rising to over $7,000 per person per year at the top tier. The standard Part B premium stands at $202.90 per month in 2026, and IRMAA layers on top of that. Keeping annual 401(k) draws below the first IRMAA threshold preserves the standard premium. Crossing it by even $1 triggers the full Tier 1 surcharge rather than a gradual increase.

The Spousal Coordination Angle

A lower-earning spouse can claim Social Security early at 62 to provide household income while the higher earner delays until 70, maximizing the couple’s combined lifetime benefit. That structure reduces the 401(k) draw required during the bridge period, since one Social Security check already covers part of the household’s expenses. The household retains some guaranteed income regardless of portfolio performance, which matters if markets cooperate poorly during the delay window.

With the 10-year Treasury yielding around 4.5% in mid-2026, intermediate fixed income can anchor the bridge portfolio while equities continue to grow, providing both cash flow and capital preservation. For income-oriented exposure, Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) currently yields about 3.4%, while JPMorgan Equity Premium Income ETF currently yields about 8.2% through a covered-call strategy. The two funds offer different income profiles, and one important distinction is that JEPI’s distributions are largely taxed as ordinary income rather than at the lower qualified-dividend rate, making it better suited to a tax-deferred account during the bridge period.

Three Steps Worth Taking Now

1. Pull your Social Security statement at ssa.gov and calculate the exact monthly benefit at 62, 67, and 70. The difference between your full retirement age benefit and your age-70 benefit is the annuity you are purchasing with each year of delay. Compare that implicit return against what your 401(k) is likely to earn.
2. Model your projected MAGI during bridge years using your expected 401(k) draw. If that figure approaches $109,000 for a single filer or $218,000 for a married couple filing jointly, the IRMAA surcharge two years later is a real cost that needs to be factored into the math. A fee-only advisor can run this calculation with full income projections.
3. Check whether a spousal coordination strategy applies. If one spouse has a substantially lower earnings record, early claiming for that spouse while the higher-earning spouse delays can reduce portfolio dependency during the bridge period and permanently increase the survivor benefit.

Editor’s note: This update corrects the 2026 IRMAA Tier 1 combined surcharge from roughly $1,300 to approximately $1,150 per person per year based on CMS-confirmed Part B and Part D figures, refreshes life expectancy benchmarks for 65-year-olds to current SSA data (84 for men, 87 for women), and updates the 10-year Treasury yield to approximately 4.5% and the JEPI distribution yield to about 8.2% as of mid-2026.