Why Delaying Social Security While Emptying Your 401(k) Can Slash Your Lifetime Taxes

A 65-year-old couple with $1.5 million in a traditional 401(k) and a combined Social Security benefit waiting at full retirement age is doing something that looks backwards on paper: draining the tax-deferred account first and refusing to touch Social Security until 70. On the Bogleheads forum and in fee-only planning circles, this has quietly become the consensus move for affluent retirees. The math is why.

The 8% return Treasury bonds cannot match

Every year a retiree delays Social Security past full retirement age, the benefit grows by roughly 8%. That increase is permanent, inflation-adjusted, and backed by the federal government. The 10-year Treasury is paying about 4.5%. Cash in a money market is earning around the 3.75% Fed funds rate. There is no comparable risk-free instrument that returns 8% with a built-in cost-of-living adjustment.

That COLA matters right now. The Consumer Price Index sits at 334 in May 2026, up from 321 a year earlier. Core PCE, the Fed’s preferred gauge, has risen from 126 to 130 over the past 12 months. A delayed benefit captures every one of those annual adjustments on a larger base, while 401(k) balances ride only on market returns.

Filling the bracket while it is empty

Between 65 and 70, this couple has something they will never have again: a five-year window with almost no taxable income. The 2026 standard deduction for married filing jointly is $32,200. The 12% bracket runs to $100,800, and the 22% bracket extends to $206,700.

Pulling roughly $130,000 a year from the 401(k) costs them around $12,000 in federal tax. Effective rate: under 10%. Do that for five years and the balance drops by $650,000 before growth, while the couple lives well and pays trivial tax. Wait until 73, layer Social Security on top, and the same dollars come out at a marginal rate near 24%, with up to 85% of the Social Security check itself becoming taxable.

The RMD and IRMAA cliff they are dodging

Required minimum distributions begin at 73. A $1.5 million balance compounding at 6% grows by then, forcing a first-year RMD near $75,000 whether the retiree needs the cash or not. Stack that on a maxed-out Social Security benefit and the household clears the first IRMAA threshold near $212,000 for joint filers, triggering Medicare Part B and Part D surcharges of $70 to $400 per person per month. The lookback is two years, so a single large withdrawal year reverberates.

Draining the 401(k) in the 60s shrinks the base RMDs are calculated on. The couple arrives at 73 with less tax-deferred money, smaller forced withdrawals, and a Social Security check that is roughly 32% larger than it would have been at 65, indexed for the inflation the country has actually experienced.

Why now, specifically

Household savings capacity is tightening. The personal savings rate fell from 6.2% in early 2024 to 3.7% in the first quarter of 2026, and consumer sentiment has dropped to 49.8, the lowest reading in a year. Retirees with the assets to self-fund a five-year bridge are using that bridge precisely because most households cannot.

Three things to do this week

1. Model the bracket fill. Calculate the largest 401(k) withdrawal you can take in 2026 while staying inside the 12% bracket (taxable income up to $100,800 for joint filers after the standard deduction). That number is your annual bridge budget.
2. Project your age-70 benefit. Pull your Social Security statement and compare the FRA number to the age-70 number. The gap, multiplied by your life expectancy past 70, is the prize for waiting.
3. Watch the IRMAA line. If a planned withdrawal year would push joint MAGI above roughly $212,000, split the distribution across two calendar years or consider a partial Roth conversion in a lower-income year instead.

The strategy is about choosing which dollars get taxed, and when.