Why a 64-Year-Old Couple Is Spending Down a $1.4 Million 401(k) First and Letting Social Security Grow 8% a Year Until 70
Most retirees protect their 401(k) and grab Social Security early, but one couple is doing the opposite and their tax math reveals why the conventional move quietly costs hundreds of thousands of dollars.
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A 64-year-old couple has $1.4 million in a 401(k), no pension, and a plan that sounds backward to most of their friends: live entirely on the 401(k) until 70, then claim the maximum Social Security benefit.
The question comes up constantly. On a June 2026 episode of Clark Howard’s podcast, a listener named Bill from Arizona with $2 million in IRA and 401(k) money laid out his version: “I think I can withdraw $200,000 each year until RMD age 75 and stay under the 24% tax bracket.” The instinct is right. The execution is where couples leave money on the table.
What Waiting Actually Buys
For anyone born in 1960 or later, full retirement age is 67. Claiming at 64 locks in 80% of the full benefit. Each year of delay past 67 adds 8%, so the check at 70 equals 124% of the full amount.
Cost-of-living adjustments keep applying while you wait. For 2027, COLA projections are tracking toward 3.3%, and that raise lands on the delayed benefit too.
Compare that with what 401(k) money earns in safe assets. A 5-year Treasury pays about 5%. Social Security’s delay credit comes with inflation protection and a lifetime guarantee, and the larger check becomes the survivor benefit when the first spouse dies. For the higher earner, that survivor protection alone justifies the wait.
Gap Years Double as a Low-Tax Window
Between 64 and 70, the couple has no wages and no Social Security. Their 401(k) withdrawals are essentially their entire taxable income, and 2026 brackets are generous for married couples. The standard deduction is $32,200. The 12% bracket runs to $100,800 of taxable income, and the 22% bracket runs to $211,400.
Say they spend $100,000 a year, an example figure somewhat above the $78,535 the average household spent in 2024. That entire withdrawal is taxed at 12% or less. Every dollar leaves the account at a lower rate than it likely would after 70.
Leftover bracket space is the real prize. Converting 401(k) money to a Roth during these years moves future RMD dollars into an account with no required distributions and tax-free growth (the stretch between a final paycheck and the start of RMDs is the whole subject of our free Roth window guide, here).
Shrinking the Tax Bomb Before It Arms
Leaving the 401(k) untouched until 70 is the costly mistake. After benefits begin, each 401(k) dollar can pull up to 85% of benefits into taxable income. RMDs begin at 75 for this age group and force withdrawals on top of a full Social Security check. A couple in the 22% bracket caught by benefit taxation faces an effective marginal rate near 40%.
Medicare adds a second trap. IRMAA surcharges run $70 to more than $400 per month per person and use a two-year lookback. Medicare starts at 65, so income at 64 sets premiums at 66. A large Roth conversion this year can raise Medicare bills in 2028.
My position: use the 12% bracket fully with spending plus conversions without hesitation, and push into the 22% bracket only after checking Social Security’s current IRMAA table so the conversion stops below the first surcharge tier.
Funding the Bridge Without Selling in a Downturn
Sequence risk is this plan’s weak spot. Withdrawals run biggest in the years before Social Security arrives, exactly when a market drop does the most damage. A Treasury ladder inside the 401(k) or a rollover IRA handles it.
Yields are about 4.5% at one year, 4.9% at two years and 5% at three years. The first three years of spending can sit in bonds that mature on schedule while the stock allocation rides out any decline untouched.
Three Moves to Make This Year
- Download both spouses’ Social Security statements and compare the age 67 and age 70 figures for the higher earner. That gap, paid for life and passed to the survivor, is what the 401(k) decline is buying.
- Build a year-by-year withdrawal map from 64 to 70 that fills the 12% bracket with spending plus Roth conversions, then test each year’s income against the IRMAA tier that will apply two years later.
- Move three years of planned withdrawals into a Treasury ladder now, and refill the ladder from stocks only after years when the market is up.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
