How the Social Security Bridge Strategy Works

An older couple smile and hold hands as they walk across a wooden bridge.

(Image credit: Getty Images)

published 18 January 2024

Wish I could take credit for this article, but I must admit this concept came from something a client sent me the other day. I know a lot of people struggle with when to take Social Security. There are many things to consider when collecting Social Security.

Although today’s article focuses on one specific strategy, it is important to note that you should really consult with your adviser and consider the specifics of your finances before choosing.

OK, now that my public service announcement is complete, let’s get into things, shall we? When considering Social Security, some of the things worth thinking through are as follows.

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Life expectancy. Now I know no one has a crystal ball, but we do have a family history and a decent understanding if we are super healthy or have myriad health issues. This is certainly relevant, as you want as much return on investment (ROI) on what you’ve paid into Social Security.

Income. If you are currently working, this is something to consider when taking your benefit. There is generally a handful of negative tax implications if you’re at a certain age, working and also taking your Social Security benefit.

Spouse status. A big deciding factor should be your spousal situation. Not only if you have one or not, but what is their benefit likely to be? Remember, if there is no working history for them, there is a good chance they’ll be collecting based not only on your earnings but when you take your benefit.

Investments and expenses. Another large consideration should be what your investment portfolio and family’s expenses tend to be. This can help determine the appropriate timing and how long you may be able to wait in the first place.

Now that I’ve given you some fodder to chew on, I want to turn your attention to the topic at hand — the bridge strategy. I want to preface again that this isn’t a recommendation, but rather, a strategy I more recently learned about that I feel is worth sharing.

The concept is simple. For context, it is important to remember that you can start collecting at age 62, which is considered collecting early. The latest you can collect — or I should say the age at which your benefit will be at its maximum — is age 70. Everyone has their full retirement age (FRA), which is technically the age at which you can collect 100% of your stated benefits (66 or 67, typically). If you collect early, you’ll be collecting roughly 70% of your benefit forever, albeit starting four to five years earlier. Conversely, if you wait until age 70 to collect, you’ll be receiving roughly 132% of your FRA benefits.

The simple math is that every year you wait to take your benefits, they grow an additional 8%. Here is where the bridge strategy comes into play. Instead of taking Social Security early, which many tend to do, you can instead start to take money out of your IRA/401(k) at the same amount your Social Security benefit would be.

This, in turn, has the same impact on your income as if you were to be taking Social Security. The benefit here is by doing so you know your benefit is growing 8% year over year (ROI) until you turn it on. The key, of course, is not to take more money than your Social Security benefit. Additionally, it would behoove you to pull these funds from more conservative investments within your accounts, as they are much less likely to surpass the annual 8% rate of return needed to eclipse the Social Security growth.

Here’s an example of the bridge strategy

Example: Mrs. Jablowski’s Social Security benefit at age 62 is $2,572 a month; at age 70, it would be $4,555 a month. On Mrs. Jablowski’s 62nd birthday, instead of turning on her Social Security, she takes $2,572 each month out of her IRA and defers her Social Security. She does this each year until age 70. At age 70, she stops withdrawing from her IRA and flips on her Social Security benefit, collecting a $4,555-a-month benefit, having received 8% growth each year on her benefits all the while.

That, my friends, is what they call the bridge strategy for Social Security. I personally find it quite interesting and can see circumstances where it would make sense and others where it wouldn’t. In any event, I think it is worth sharing as one more thing to consider in the age-old riddle of when is the optimal time to collect your Social Security.

Hope you all enjoyed this little nugget of knowledge, and as always, please stay wealthy, healthy and happy.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.