Why Wealthy Retirees Are Spending Their 401(k)s First and Letting Social Security Compound to 70

A growing cohort of affluent couples is working a counterintuitive playbook: spend down the 401(k) between ages 65 and 70, let Social Security compound untouched, then switch on a benefit that is 24% larger and inflation-protected for the rest of two lives.

The math starts with a hypothetical couple, both 65, holding $2.5 million in a traditional 401(k) and each entitled to $3,300 a month at full retirement age 67. Claiming today locks in $6,600 a month for the household. Waiting until 70 earns each spouse 8% a year in delayed retirement credits, a 24% boost over FRA, lifting each individual check to roughly $4,092 and the household total to $8,184.

The Bridge Math

Covering five years of spending without Social Security requires drawing roughly $130,000 a year from the 401(k), about $650,000 total across the bridge period. That is a real and visible cost. What you get in return is a permanently larger, COLA-protected floor for the rest of two lives and, critically, for whichever spouse survives the other.

Projecting lifetime totals to age 90 shows why the trade pencils out. Claiming at 67 delivers $3,300 times 12 times 23 years for both spouses, roughly $1.82 million in aggregate benefits. Delaying to 70 delivers $4,092 times 12 times 20 years for both spouses, roughly $1.96 million. The couple finishes ahead by approximately $140,000, and that figure does not yet count the larger COLA base the surviving spouse carries forward alone, which is often the dominant variable in the entire calculation.

Why The Bridge Window Is Worth So Much

The tax opportunity inside those five years is the bigger prize. From 65 until Social Security activates at 70, taxable income is entirely within the couple’s control, limited to whatever they choose to pull from the 401(k). That creates five clean years to execute Roth conversions before Social Security benefits begin counting toward provisional income, before required minimum distributions arrive at 73, and before the 85% Social Security taxation threshold becomes a permanent fixture of every year’s return.

Withdrawing $650,000 from a $2.5 million pre-tax balance also shrinks the future RMD base by roughly a quarter. Smaller RMDs compound into lower forced withdrawals through the couple’s 70s and 80s. Most break-even calculators focus only on the benefit comparison and ignore this secondary payoff entirely.

The IRMAA Trap That Wrecks Sloppy Conversions

Medicare reshapes every conversion decision. The first IRMAA tier for 2026 begins at $218,000 of modified adjusted gross income for joint filers, and Medicare applies a two-year lookback, so income from a conversion done at 65 sets premiums at 67. Crossing that first tier triggers Part B and Part D surcharges of roughly $81.20 and $14.50 per month, per person, or approximately $1,148 per beneficiary per year. Higher tiers escalate that cost several thousand dollars per person.

The rate environment adds another dimension. The 10-year Treasury yield sits near 4.47% as of mid-June 2026, well above where most retirees modeled their plans a few years ago. At the same time, the Federal Reserve has held its target range at 3.5% to 3.75% throughout 2026, with its last cut coming in December 2025 and no further easing widely expected this year. Elevated yields support a strong case for converting tax-deferred balances now, while ordinary income brackets and rates are clearly visible and prior to any future policy shifts.

The Survivor Variable

Joint life expectancy is the factor most spreadsheets leave out. When one spouse dies, the household keeps only the larger of the two benefits, and the survivor files as a single taxpayer with notably compressed tax brackets and IRMAA thresholds. A 24% larger base, growing annually with COLA adjustments, can be worth tens of thousands of dollars a year by the late 80s. That is longevity insurance funded with 401(k) dollars the couple would have surrendered to RMDs regardless.

The stakes on getting this right have risen with recent news. The 2026 Social Security Trustees Report, released June 9, now projects the Old-Age and Survivors Insurance trust fund will exhaust its reserves in the fourth quarter of 2032, one quarter earlier than the prior estimate. Without congressional action, the program would then be able to pay only about 78% of scheduled benefits. Locking in the maximum possible benefit today provides the largest possible cushion if future benefit adjustments are ever legislated.

What To Do This Week

1. Pull each spouse’s primary insurance amount from SSA.gov and confirm the FRA and age-70 figures before committing to any strategy. New earnings years and zero-earnings gaps from any early retirement can move both numbers.
2. Model 401(k) drawdowns and Roth conversions together, with MAGI held under $218,000 in every year that will set Medicare premiums two years later. Treat the IRMAA cliff as a hard ceiling, not a soft guideline.
3. If projected income in any conversion year would clear the first IRMAA tier, the cost of a fee-only advisor or a matched planner is trivial against five figures of avoidable surcharges and overpaid lifetime taxes.

Editor’s note: This article was updated to reflect the current 10-year Treasury yield of approximately 4.47% and the Federal Reserve’s target funds range of 3.5% to 3.75%, held steady throughout 2026 since December 2025. It also incorporates the 2026 Social Security Trustees Report projection that the OASI trust fund will be depleted in the fourth quarter of 2032, one quarter sooner than prior estimates, and adds the precise 2026 IRMAA Tier 1 surcharge amounts of $81.20 per month for Part B and $14.50 per month for Part D, per beneficiary.