Early Retirement & Social Security: Is Your Statement Estimate Accurate?
Episode 25
Early Retirement & Social Security: Is Your Statement Estimate Accurate?
Published on March 4th, 2026
Episode 25 of Retirement Tax Matters examines the discrepancy between Social Security statement estimates and the sometimes lower-than-expected payouts for high-net-worth individuals who retire early. Garrett Crawford, CFP® professional, explains that standard SSA statements often present a misleading benefit amount because they assume continued earnings at your current salary until the day you begin benefits. To avoid this trap, early retirees must utilize the Social Security Benefit estimator tool that will help model a future income of $0, revealing a more realistic benefit amount. The discussion also highlights the necessity of bridging the multi-year income gap with taxable brokerage accounts to avoid early withdrawal penalties from retirement accounts. Finally, the episode emphasizes that maximizing the higher earner's benefit is a vital strategy for protecting a surviving spouse from a future post-death tax shock.
Key Tax Planning Questions
Question 1: What if I retire early and don't have 35 years of earnings for Social Security?
To calculate your retirement benefit, the Social Security Administration looks at your Average Indexed Monthly Earnings (AIME) using your highest 35 years of work history. If you retire in your mid-50s and have only worked for 30 years, the SSA will fill those remaining five non-working years with $0 in your calculation.
While a decade of zeros sounds alarming, the impact on your final check may be less significant than you expect due to the progressive nature of the Social Security formula. The SSA applies your career earnings to three specific bend points designed to replace a higher percentage of income for lower-earners.
For high-net-worth individuals who have already hit the maximum taxable earnings for most of their careers, you likely have filled up the most generous portions of the formula. Because additional high-earning years often only provide incremental benefit after passing the second bend point, the cost of retiring early is often a price many HNW retirees are willing to pay for additional years of freedom. To see your specific numbers, you should model $0 in future earnings using the SSA.gov benefit estimator tool.
Question 2: How does early retirement impact Social Security filing strategy?
For high-net-worth retirees an early retirement is usually an outfow of being in a financially secure situation rather than hitting a specific age milestone. Because your situation is built on a strong foundation of assets ($2M–$8M), you likely have significant flexibility in how you solve for the Social Security filing challenge.
Because of the way Social Security works, you don’t even have the option to file for Social Security benefits until you’re age 62. I generally advise the higher earning spouse (especially if they’re older) to waiting to claim until at least Full Retirement Age (67) unless health issues dictate otherwise. However, many early HNW retirees find it refreshing to remember you don't have to lock in that decision today. I encourage early retirees to view the window between age 67 and 70 as an optional window where you wait and see how each year goes.
If the economy is doing well and your investments are growing, it may be prudent to continue drawing from your portfolio and let your Social Security benefit earn the 8% annual delayed retirement credit every year you defer filing for Social Security. Conversely, if the market drops significantly while you are in your late 60s, you can pull the Social Security lever to stop the monthly withdrawals from your investments, effectively de-risking your retirement plan.
This gap period between early retirement and age 70 is full of tension but also creates a unique golden window for financial planning. On one hand, your lower income makes this an ideal time for strategic large Roth Conversions and harvesting long-term capital gains. On the other hand, you retired early to maximize time with family and passions—meaning this may be the time you choose to spend more and enjoy the wealth you've built.
Question 3: My spouse and I are both 56 and planning to retire this year with about $5 million in our accounts. We’re concerned that if we both stop working now, our Social Security checks will be way lower than we expect. We’ve heard our benefit statement may be wrong because we’ll have a decade of no earnings—is there a specific way we should be looking at spousal and survivor benefits to make sure the survivor isn't stuck with a higher tax bill later?
This scenario captures a common pitfall: the Social Security statement assumes you will continue to earn your current salary until the day you claim benefits. If your statement shows a $5,000 monthly benefit at age 70, that number is likely projected based on you working another 14 years. For an early retiree with a decade of $0 earnings, this estimate is inherently misleading.
The first step is to establish accurate data for informed decision making is to log into your online SSA.gov account and using the Retirement Benefit Estimator tool. By entering $0 for your future estimated earnings, you can model your real benefit amount and make decisions based on reality rather than a projection. While the final check may be lower, the impact is often less than high-net-worth retirees fear because their high-earning years have already filled the most impactful portions of the formula. However, it’s critical to check your actual benefits to make sure you’re looking at real numbers.
From a planning perspective, your Social Security benefit remains one of your best financial assets due to its annual cost-of-living adjustments and survivor features. Even with a large portfolio, the higher-earning spouse should typically consider delaying their benefit to age 70 to maximize the inflation-protected income for the surviving spouse. There are exceptions based on age difference and health situations.
Most importantly, you should utilize the gap between retirement and age 70 to engage in tax-return driven financial planning. By performing annual income projections each fall, you can identify the optimal amount for end-of-year Roth Conversions. This allows you to pay taxes at today's Married Filing Jointly rates, protecting the survivor from a future tax shock when they are forced into the less-forgiving Single filing category later in life.
Full Episode Transcript
Adam: Good morning and welcome to Retirement Tax Matters. I'm Adam Reed. This is Garrett Crawford, our resident CFP® professional. How are we doing this morning, Garrett?
Garrett: Glad to be back. We opened last week saying I'd been a little sick and I gave it to my buddy Adam. We're back in the saddle, though.
Adam: What doesn't kill you makes you stronger, right? Getting back into this thing and feeling better. At least we still recorded last week, but we wanted to launch into a new series. Big marketing campaign: Early Retirement and Blank.
Garrett: Yep.
Adam: We're going into this series because a lot of high-net-worth people we work with are probably thinking, "Hey, I've got a lot of money and I'm still in my late forties or early fifties, and I don't know if I want to be doing this until 65." We want to release a series where we talk through health insurance, Social Security, and how we serve people in that space. Most people aren't asking how to stretch it to 65; they are asking when they can hit the eject button.
Garrett: Some people are really excited about that, and other people are fearful.
Adam: Before we started today, we were talking about how there are two mixes of people in this high-net-worth space. There are ones just made to work, and others who have put in their dues and want to learn how to make it work if 65 is not the number. We talk a lot about the foundation of retirement, which is Social Security. Many people get on the website to look at projections, but it can be tricky to land on what is accurate versus what is theoretical. Garrett, what are some thoughts that go through your mind as people look at these statements?
Garrett: There's a lot to that question. We're going to laser focus on the idea of retiring early, before age 60. You can't take Social Security until 62, and you have the option to delay until 70. The number one mistake I see involves the red, white, and blue Social Security statement. Sometime around 2016 to 2018, they quit sending paper statements except during key years. Up until age 60, they mail it every five years; after that, it's every year.
Garrett: I'm imagining that 55-year-old person with a few million saved who thinks, "Why wait until 65?" The mistake is that the SSA statement assumes you will continue to work and earn your current salary all the way until the day you start benefits. I pulled a sample statement for "Wanda Worker." It says estimates are based on earnings to date and assume you continue to earn a specific amount until you start benefits. If you retire at 55 but the statement assumes you earned $200,000 for 15 more years until age 70, that number is not accurate. It's built on a technical mirage.
Garrett: High-income people retiring early need to do more work than just printing a statement. The best way is to log into the Social Security website and use the tool where you can type in estimated future earnings. Put in an estimated annual income of $0 for those future years. You'll see the difference between the mirage and the reality. The silver lining is it might not impact your benefit as much as you think, but you need to check.
Adam: So you've gotten an estimate and decided to call it quits in your mid-fifties. What do those people do in the meantime to bridge the gap before Social Security and bridge portfolio pressure?
Garrett: For me, this is the most fun part of financial planning. Most people will have accumulated a large amount in a traditional or Roth IRA, but you can't touch those without a 10% penalty before 59 ½. There is the Rule of 55 for 401(k)s, but I rarely see retirees actually use it. Most affluent early retiree candidates have started a separate brokerage or taxable investment account earlier in life. This makes early retirement feasible. Taking what you have and optimizing those resources is a fun process, but it depends on your disposition toward work.
Adam: How should clients be thinking through spousal and survivor benefits? That often gets overlooked when just looking at one statement.
Garrett: If you are married, Social Security is not just a calculator question; the math gets more complicated. One of the best characteristics is the survivor benefit feature. It says if you have two married people and one dies, the survivor retains the higher of the two benefits plus an annual COLA. When we talk about early retirement, we still want to prioritize that higher earner's benefit. In a traditional marriage where the husband might be older, women generally live longer. Run the numbers, and it may show that the older, higher-earning spouse should delay until 70 to protect the survivor. This adds pressure when you want to retire early. Use Social Security planning software to get the mathematical best answer, then decide if you want to walk that back to prioritize happiness or spending now.
Adam: It's such an interesting topic because while it seems straightforward, for the $2M–$8M crowd, it becomes dicey when bridging a 10-year gap. If you're planning on retiring early, go to the website, type in those future earning dollars, and be mindful of the survivor benefit. It's a powerful tool as long as it's there, and it's survived World Wars and recessions. Check out our website for free resources and retirement checklists. We're on Apple, Spotify, and YouTube—a like and follow really helps our exposure.
Garrett: Absolutely.
Adam: This is Retirement Tax Matters. I'm Adam Reed, and this is Garrett Crawford, CFP® professional. We look forward to keeping this going.