Spend the IRA First, Claim Social Security Last: The Order That Adds Six Figures for $500,000 Retirees
Retirees with $500,000 in a traditional IRA who delay Social Security to 70 can collect roughly $259,200 more over 20 years than those who claim at 62. Claiming Social Security at 62 permanently cuts benefits by up to 30%, while waiting until 70 grows them to $2,480 versu…
Intelligence analysis by Llama
Retirees with $500,000 in a traditional IRA face a sequencing decision that determines whether their portfolio lasts. The choice is whether to leave the IRA alone and start Social Security at 62, or spend the IRA first and let the Social Security benefit grow until 70.
Imagine you have $500,000 in a special savings account called an IRA. You also have a Social Security check coming in when you retire. The question is, should you use the money in the IRA before you start getting your Social Security check? If you do, you can fill up your low tax brackets and make your Social Security check grow bigger over time. It's like saving for a rainy day, but instead of saving money, you're saving tax brackets.
Analysis
A $60B Vote of Confidence
The Social Security benefit formula is fixed by two variables: a wage-indexed average of the 35 highest-earning years, and the age at which the retiree claims. Claiming at 62 permanently reduces the benefit by up to 30% relative to the full retirement age amount. Waiting past full retirement age adds about 8% per year until age 70, which produces a roughly 24% increase for someone whose full retirement age is 67.
Why Spending the IRA First Pays
The bridge strategy works because the return on delaying Social Security is guaranteed, paid in inflation-adjusted dollars, and set by statute rather than markets. Compared with the alternatives available for safe money, the 8% delay credit is difficult to match. The 10-year Treasury yield sat at 4.54% on July 9, 2026, near the high end of its recent range. The national average 12-month CD paid 1.65% APY as of June. Neither carries an automatic inflation adjustment.
The Six-Figure Gap
Take the same $2,000 full-retirement-age benefit. A retiree who claims at 62 collects about $1,400 per month; one who waits until 70 collects about $2,480. Over the 20 years from age 70 to 90, that difference totals roughly $259,200, before COLA compounding. Even over a shorter 15-year period to age 85, the gap is about $194,400. Both are six-figure numbers, and both understate the outcome once 2.8%-style COLAs compound on the higher base year after year.
Key points
- Retirees with $500,000 in a traditional IRA who delay Social Security to 70 can collect roughly $259,200 more over 20 years than those who claim at 62.
- Claiming Social Security at 62 permanently cuts benefits by up to 30%, while waiting until 70 grows them to $2,480 versus $1,400 monthly on a $2,000 base benefit.
- Spending the IRA first fills empty low tax brackets and shrinks future required minimum distributions, which start at 73.
- The six-figure gap between claiming early and claiming late generally falls in the late 70s to early 80s.
If retirees spend their IRA first and delay Social Security until 70, they can collect roughly $259,200 more over 20 years than those who claim at 62. This strategy can provide a larger guaranteed income floor and help retirees last longer in retirement.
However, this strategy requires enough in the IRA to cover roughly 8 years of expenses, reasonable health and family longevity, and comfort with a smaller portfolio in exchange for a larger guaranteed income floor. If retirees do not have enough in their IRA, they may need to claim Social Security earlier, which can reduce their benefits by up to 30%.