Picture a couple, both 62, who retired this spring after decades of work. Their 401(k) shows roughly $600,000, the number they had spent years circling on the spreadsheet. Then the markets turned ugly, their statements thinned out, and the same question started keeping them up at night: did we retire at exactly the wrong moment?
It is a familiar feeling in this uncertain economy. In May, consumer prices rose 4.2% annually, the highest rate in three years, according to the Bureau of Labor Statistics. Meanwhile, consumer sentiment fell to its lowest reading since the survey began tracking Americans’ feelings about the economy more than seven decades ago, according to the University of Michigan. On forums where new retirees compare notes, variations of the same post appear almost daily: we just retired, the portfolio is down double digits, and we are terrified to start pulling from it.
This is exactly where Social Security earns its keep, and where the conventional advice (delay, delay, delay) deserves a second look.
Why Selling Into a Slump Is the Mistake That Lingers
Financial planners call it sequence-of-returns risk, but the plain version is simpler: pulling big chunks out of a portfolio while it is down does damage that compounds for the rest of retirement. The shares you sell at depressed prices never get to participate in the recovery. A portfolio that drops 20% and then has $40,000 yanked out of it has a much harder climb back than one left alone to heal.
For a couple drawing 4% from $600,000, that is roughly $24,000 a year coming out. In a down year, every one of those dollars is sold at a discount, and the math of recovery gets ugly fast. The first few years of retirement matter disproportionately. A bad start is the one retirement mistake that is hardest to undo.
Claiming Early as Portfolio Protection
Social Security at 62 comes with a permanent haircut. Claiming five years before full retirement age (FRA) trims the monthly check by up to about 30%. On a benefit that would have been $2,400 at FRA, that is roughly $1,680 a month instead.
The counter-intuitive part is what those reduced checks let you do. If two early benefits together cover most of the grocery, utility, and insurance bills, the couple can dial portfolio withdrawals down to a trickle, or pause them entirely, until markets recover. The check is smaller, but the nest egg stays intact and keeps compounding. In a rough sequence, that trade can be worth more than the lifetime difference of waiting.
A permanently smaller Social Security check is a known cost. Selling a chunk of a $600,000 portfolio at the bottom is an unknown cost, and historically a much larger one.
The Honest Counterweight for Couples
Here is the nuance that single-person advice misses. When one spouse dies, the survivor keeps the larger of the two benefits. That survivor check is tied to whatever age the higher earner claimed. Locking the higher earner in at 62 permanently shrinks the income the surviving spouse will live on, possibly for decades.
A stronger move for many couples is a split: the lower earner files at 62 to cover near-term bills, while the higher earner keeps delaying, ideally toward 70. Each year of delay past full retirement age adds roughly 8% to the check, and that boost flows straight into the survivor benefit later.
Where Social Security Fits With Everything Else
Social Security is not the only bridge over a bad market. A 10-year Treasury currently yields about 4.5%, so a cash and short-bond bucket can fund a year or two of spending without touching stocks. Trimming travel, picking up consulting hours, or delaying a big purchase all do similar work.
With prices climbing steadily across groceries, utilities, and energy, Social Security’s annual cost-of-living adjustment (COLA) is one of the few retirement income streams that automatically keeps pace with inflation.
What to Sit With Before Filing
Two things are worth holding in your head as you weigh this decision:
- The asymmetry of mistakes. Claiming a year earlier than ideal is recoverable. Selling a large slice of a depressed portfolio in your first retirement year often is not. If Social Security can keep the portfolio mostly untouched through a rough patch, that protection has real value even at a reduced benefit rate.
- Think as a household, not as individuals. The higher earner’s claim age sets the floor for the surviving spouse’s income. Splitting the decision (one early, one delayed) often gets you both income now and a stronger safety net later.
Every couple’s numbers, health, and tax picture are different. A short conversation with a fee-only planner before filing is usually money well spent.
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