The Two Most Underrated Social Security Features for High-Net-Worth Married Retirees
Episode 37
The Two Most Underrated Social Security Features for High-Net-Worth Married Retirees
Published on June 1st, 2026
Episode Summary
Episode 37 of Retirement Tax Matters breaks down why high-net-worth married retirees with portfolios in the $2M to $8M range often look past important elements of their Social Security filing strategy by prioritizing ROI instead of incorporating the risk reducing benefits of Social Security in their filing analysis. Garrett and Adam analyze the financial impact of early filing on the household survivor benefit, demonstrating how the older, higher-earning spouse can treat delaying to age 70 as a type of insurance protection that safeguards a surviving spouse's lifetime purchasing power. The conversation details the historical volatility of the cost-of-living adjustment, illustrating how retirement income plans can be exposed to sudden inflation spikes when they fail to establish a maximized, inflation-protected income base. By maximizing the higher earner's baseline benefit, disciplined savers establish a larger guaranteed income base that allows compounding inflation adjustments to efficiently de-risk the portfolio over a multi-decade timeline. The episode outlines the tactical value of using portfolio withdrawals from a pre-tax IRA or employer 401k to bridge early retirement living expenses, drawing down investment balances to safely secure this inflation-protected asset for the household plan.
Key Tax Planning Questions
Question 1: What if Social Security runs out?
Early in my career, I failed to address this question upfront. I would spend 30 to 45 minutes talking to a retiree about their Social Security filing plans, laying out a detailed framework that often involved an older, higher-earning spouse delaying their benefit until age 70. Then, at the very end of the meeting, the retiree would say, "That sounds great, but I just don't think Social Security is going to be around for my retirement." Look, if you don't think the program is going to be solvent or you assume that benefits are going to get cut, then it is completely reasonable to dismiss any recommendation that causes you to delay receiving payments now. I tell clients that I don't have a crystal ball regarding the future or solvency of Social Security any more than anyone else. However, as a financial planner in my late 30s, I am building my own retirement plan under the assumption that some form of Social Security benefits will be there when my turn comes.
My operating belief is that Social Security is one of the most successful programs the government runs. The program turns 91 years old this year, having survived many different presidential administrations, wars, and volatile economies. I think the general design is fundamentally good for a stable economy. Now, I do think changes will have to be incorporated over time, but Social Security has a long track record of implementing adjustments and evolving. Maybe that eventually means more payroll taxes on working people like me in the near future. I am not entirely sure what the final fix will look like, but I believe Washington will eventually solve the solvency issues for the long haul.
Most of my writing and speaking will hold to an underlying presumption that Social Security will be here for your retirement and mine. If I am wrong, we will just have to do the best we can to pivot and make the best of a bad situation. But generally speaking, it is incredibly hard to make big financial planning decisions based on what might happen legislatively down the road. Taking your benefit early strictly out of fear of sustainability will have real financial consequences in the long term if you or your spouse live a long time.
Question 2: Should I take Social Security early and invest it?
I have heard this approach many times throughout my career. Sometimes the retiree asking has seen a recent run-up in the stock market and wants to capture more of that growth, operating under the assumption that they can net out more total dollars if they take Social Security early and invest it. Another type of retiree might come to this question with deep-seated feelings that the government is generally poor at managing things, meaning they simply want their money out of the Social Security program and under their own personal purview. At the end of the day, my job as a financial planner is to help educate my clients so they can clearly map out the long-term consequences of taking different actions. This entire conversation about delaying until age 70 is not a moral issue. For some, the idea of waiting until 70 is an absolute non-starter. For others, they just need some clear financial planning and strategy to see why waiting could make a lot of sense for their household. Whatever path you choose, the goal is still to withdraw enough money to do all the things you and your spouse want to do while safely accomplishing your financial goals.
With that said, I find that I get significantly more questions about taking Social Security early when the market is performing well. Investors can get a little greedy during a bull market and easily forget that stocks can turn around and stay down for much longer than we remember. We don't have to look back very far to find extended stretches where the market was virtually flat, such as the ten-year period from 1999 through 2009. Having a safe, guaranteed asset like Social Security that doesn't fluctuate with market volatility provides a baseline of structural stability. This stability makes it a whole lot easier to spend your money with true confidence in a $2M–$8M retirement.
There is also a major tax planning aspect to consider. If you choose to delay your Social Security benefit until a later age and you have enough income coming in from other outside resources, you preserve a valuable window of lower ordinary income. This gives you the necessary tax bracket room to execute proactive, strategic Roth conversions. If the market grows over the long haul exactly like you expect it to, those tax-free Roth accounts will be the ultimate beneficiary of that growth rather than the IRS. Ultimately, as Adam and I discussed in this week's 37th episode of Retirement Tax Matters, retirees can easily underestimate the power of a maximized, delayed Social Security benefit when you combine it with the compounding strength of the annual Cost-of-Living Adjustment and the long-term protection of the survivor benefit feature.
Question 3: Bob has always planned on taking his Social Security benefits at age 67 next year in 2027, which corresponds to his Social Security Full Retirement Age. Bob is married to his wife, Annie, who will be turning 58 in a few short months. Bob and Annie retired early due to working and saving hard and receiving a substantial inheritance from Bob's parents. Bob and Annie have a $6M net worth with no debt, consisting of $2.5M in a Traditional IRA and $3.5M in a brokerage account. They have been living off a pension Bob has and dividends from the brokerage account. Bob is now wondering if he should take or continue delaying Social Security at age 67.
Even though there is a lot of great information in this case study, the right answer for Bob and Annie depends on a more in-depth conversation about their current health, how their children are doing, and what specific lifestyle expenses they want moving forward. I set it up that way because the strategy below is just one direction that may need adjustment based on your unique situation.
But I would start this conversation by making sure Bob and Annie understand the implications of what I call the two most underrated features of Social Security. Bob and Annie have a sizable age gap. If Bob has the higher Social Security benefit, Annie being female and almost nine years younger means that if she is currently healthy, there could be a significant amount of time that Annie is collecting Bob's benefit under the survivor benefit rule. We are talking about a potential 30-year timeline decision for Annie receiving Bob's Social Security benefit. On top of that, we would want to discuss how if Bob waits until age 70, his Social Security benefit, and possibly Annie's future Social Security survivor benefit, will receive larger COLA adjustments because of the larger baseline built by delaying until 70.
I would then talk Bob and Annie through a strategy where Bob considers delaying his Social Security by a few more years to age 70, but taking out the equivalent benefits he would have received from Social Security directly from their $3.5M brokerage account instead. My goal would not be to minimize their lifestyle spending, but instead to help them bridge the gap of getting all the income they need, and more, without confusing filing for Social Security as the single key that unlocks more income for their spending. Sometimes retirees can fall into the trap of thinking they cannot spend from the principal of their investments, or they just do not like watching the investment account balance go down. If we delay that Social Security income a few more years, we can also use that lower-income window to execute additional strategic Roth conversions up to the top of the 22% or 24% marginal income tax bracket. This proactive step will possibly preseve even more tax-advantaged money for Annie or their children one day.
Full Episode Transcript
Adam: Good morning, and welcome to Retirement Tax Matters. I'm Adam Reed, and this is Garrett Crawford, our resident CFP® professional. How are we doing this morning, Garrett?
Garrett: I just got back from vacation.
Adam: I thought you looked nice, tanned, relaxed, and rested.
Garrett: Getting away for just a little bit is helpful. It is rejuvenating coming off a big tax planning and tax return review season. I got to go to Boise, Idaho. It was beautiful and a little bit cooler. I think I escaped the Tennessee start of the humid summer, but I had a great time. I know we missed one week of posting here, so for all the people who were waiting for that next episode, even we have to take breaks too.
Adam: Well, I was going to say, I feel like we have been really consistent this year. I think this is the first week we have missed this year. We are almost 20 weeks in. It even felt a little rusty this morning saying, "Good morning. Welcome to Retirement Tax Matters." I was like, "Wait, what do I say here?"
Garrett: Yeah, and I was plugging in all the stuff to get this ready, and I was like, "Well, how did I do this?" It is just funny when a lot of things are not like riding a bike. It takes a little bit to get back into things.
Adam: Yeah, absolutely. Well, we will go ahead and hop right in and jump into our topic for today. As you guys know, we cover a lot of different topics on this podcast, from Roth conversions to retiring early to different products and policies that you can put in place to benefit or bolster your retirement. But today, we want to take a minute to talk about Social Security.
Adam: My favorite subject. Just chomping at the bit. Couldn't sleep last night, so excited to talk Social Security. It's funny, you actually kind of cut your teeth on Social Security and helping people file. That's where you started your expertise in this industry and then kind of overflowed into—
Garrett: Well, yeah. Honestly, if you go back to when I started in 2013, as we were building our firm and finding clients, it might be crazy to think, but a lot of our clients came from Social Security workshops that we were doing. People were getting ready to file for Social Security, had lots of questions, and didn't know where to find answers. It was a different world 10 years ago.
Adam: They didn't just hop on AI and plug it all in, right?
Garrett: No, they didn't. In fact, even advisory places like our firms really weren't equipped. So I was one of the first people in that era to dedicate myself to learning something that you couldn't sell, which is a different conversation for another day. People help you with Medicare because there is a commission involved. People don't like to get into the weeds of Social Security because the consequences are big, and there is no way to get paid for that. It has been an industry shift, but I started doing that 13 years ago and helping people. It is really one of my favorite parts of planning.
Adam: Well, and when Garrett started Social Security, he had dark, black, long hair. And then as he hung out with all these older people and talked about Social Security all the time, he slowly went gray so he could look like he was ready to file, even though he wasn't quite there yet.
Garrett: Yeah, my hair color has transformed since—
Adam: Oh, so Social Security did it to you.
Garrett: The more I learn about Social Security, the whiter it has gotten.
Adam: Yeah, so be careful. If you have some dark hair and you don't want it to go gray, maybe turn the episode off and come back to it in a few years.
Garrett: I never realized this about myself, Adam. You're right.
Adam: Oh, we nailed it. So, anyway, we wanted to talk about two underrated features of Social Security and maybe getting out in front of most of the people who are viewing this podcast in that $2 million to $8 million range. Really, a lot of the people we have talked to that have reached out to maybe work with us or ask more questions have probably been beyond that $8 million number. This isn't going to be the largest portion of your retirement income, but we still believe it's a substantial and important part of everyone's retirement income, especially those who are retiring now. Hey, maybe you know more exactly what it's going to look like for your retirement, whereas younger guys like us or some of our peers don't exactly know what it's going to look like. So you guys can plan around it and utilize it. But there are really two pieces of Social Security that we wanted to highlight today and talk through how we think about those. I will let you do the big reveal. Two underrated pieces of Social Security—what's the first one, Garrett?
Garrett: Yeah, sure. Let's just come out guns blazing with what I feel like is the most underrated part of Social Security, and that is its survivor benefit feature. As I was thinking about putting this podcast together this morning, I realized there's so much Social Security content online. Through the years, I've even thought, man, I should have done this 10 years ago when I was learning it all. But I'm sure we're not going to be the first people on YouTube to discuss the idea that survivor benefit features of Social Security are a hugely important feature. But what I think is unique about what we're doing, Adam, is we're always bringing that conversation into a higher net worth crowd that's not always talked to.
Garrett: I will take one step back. In my years of doing this, I don't want to assume that people understand how Social Security works. In fact, it used to be shocking to me, but now it's normal that a lot of you have gotten those green Social Security statements through the traditional mail for a lot of your lifetime. They quit showing up around 2012, but now you get them during key years delivered to your house and your mailbox. A lot of you are busy working, doing great at your job, and not thinking about how you are going to file for Social Security. You get there, and you're doing a break-even analysis. I feel like married retiree couples generally undervalue the importance of the Social Security survivor benefit.
The way that works is let's say you have two married people. Let's say one person's benefit is $1,500 a month and the other spouse's benefit is $4,000 a month. When you're married, both of those spouses can collect—the $1,500 a month and the $4,000 a month. That's $5,500 a month that you would get as long as both of you are alive. When inevitably one spouse dies before the other, the survivor benefit rule says that the remaining spouse gets to keep the higher of the two benefits. While you were getting two checks, when one spouse dies, the surviving spouse is going to be able to retain the higher benefit, and in that case I just gave you, the $4,000 benefit lives on.
One of the gotchas that a lot of people would walk into my office with, or we're doing a Zoom call, and especially I can relate to this because of my engineering background: we just kind of feel like we can throw all these numbers into a spreadsheet. If I live to 90, 91, or 92, and then I'll make another column that says if my wife lives to 95 and lives longer than me. If I take it at 62, 66, or 70, I can run those numbers pretty quick. In the age of AI, this is not very hard. Just put your numbers in, your benefit amounts, and have it give you a recommendation. The trap that I felt like a lot of people fell into was that it's easy to think both spouses are going to live to an average life expectancy or that one spouse is going to live into their 90s, but that is not how life works.
There are surprises. Early, unexpected deaths happen. One of the reasons a Social Security survivor benefit is underrated is that as much as it is a question about investment return—like how am I going to get the most dollars out of Social Security—it also has this insurance component to it. This means if you die earlier, then your spouse gets the higher of the two benefits, but they lose the lower one. In an extreme example, let's say somebody took a benefit at 62, and their benefits were significantly less than if they had waited until 70. If they die at 70, their remaining spouse is going to have significantly less money to live on for the rest of their life. If their spouse lives to 90, that's a huge difference if you take that benefit earlier rather than waiting until 70.
The other option would be like let's say somebody waits all the way until 70 and they have a monthly benefit of $5,000 a month. There were obviously costs; there were probably things that were deferred to get to age 70. But in the event that person died at 71, their remaining spouse is now getting $5,000 a month for the rest of their life instead of maybe taking it early and getting $3,800 or something per month. I just think the most underrated part is that the remaining spouse is going to have that monthly dollar amount less for the rest of their life if taken early. It's not always a break-even analysis, and it's not always as simple as plotting it on a spreadsheet because you have to know all the rules in order to model it right.
Adam: Yeah, and I think Social Security plays a part into a lot of the Roth conversion planning we're doing, thinking through how with that surviving spouse benefit, maybe this is the bad side of it or the side that needs to be planned around. If you have somebody who has a $5,000 Social Security benefit, but their spouse never worked or didn't work much and so they have a smaller benefit, and then they had a pension as well that has 100% survivor and an annuity with 100%, all of a sudden it's like, oh my goodness, you're going to go from the 22% bracket up to almost off the charts when one passes away. It's a good thing to have all that extra income, but helping people plan through on the Roth conversion side of things ties this into a lot of the other content we make about how important it is for our high net worth clients—who typically do have the larger pensions, larger RMDs, and larger Social Security numbers—to be planning around those things and not letting it catch you off guard down the road. I know we kind of give it a funny name—we call it the golden window of financial planning—but if you're thinking about retiring early and this idea that you have extra assets, if you're going to delay Social Security to 70... I'd throw a little disclaimer in there: everybody's unique, but the times this comes up the most is when you have a traditional situation where maybe a male is older, has a higher benefit, and is going to live shorter than a younger female spouse. It can make sense for that older, higher benefit to delay until 70 and then pull money from other accounts. Just thinking through those things and how you pull in Roth conversions is an important thing.
Adam: Yeah, and that is probably a good segue into looking at the cost-of-living adjustments (COLA). It's funny, I talked to a client the other day about annuities, and she was like, "I love annuities." She bought an annuity in 2019, and she was like, "That was incredible. I just got... it was so laid back. I didn't care about the markets." Then I talked to a guy the other day who maybe panic-bought an annuity in 2022 as things were recovering, and he hates annuities. A lot of it has to do with when things happened. I think about the people who retired in 2008 or 2009 when inflation was pretty low there for five, six, seven, eight years. They were like, "Who really cares about this COLA adjustment?" But people who have retired in the last five years, hey, this COLA adjustment is pretty important. Those eggs that I was buying my first year of retirement and what they used to cost... it always comes back to the eggs. But I think it's a hugely important piece of the puzzle, and it's a very expensive piece of the puzzle. Tell me how you're helping high net worth retirees think through the COLA adjustment and why it's such an underrated piece of the puzzle.
Garrett: Inflation is like the silent killer of a retirement plan. I remember when I first got access to professional financial planning software, there were really two things that could totally destroy a plan. One was an extended long-term care event, like Alzheimer's, where you require round-the-clock nursing care 24 hours a day and that stretches into 10 to 15 years. It's hard to plan around that one; that would blow up almost anybody's plan. Maybe they have a long-term care insurance plan, but that will blow something up. The other one is just what happens if inflation goes from an average of 2% versus 4%. If that's sustained over a certain amount of time—and I know that's above average—it will wreck people's income plans.
This COLA—it's not a soda—is a cost-of-living adjustment. It helps you keep up with the inflation adjustments, and your Social Security benefit has inflation protection. I have the cost-of-living adjustment history here from the Social Security Administration, and I'm just going to read a few of these dates out. I used to do this at workshops. I came into the industry in 2013, and as I look at this COLA history chart from Social Security, in 2013 the COLA amount was 1.5%. We were coming out of that Great Financial Crisis, which a lot of our listeners will remember. In 2009, the cost-of-living adjustment was 0%. In 2010, it was 0%. In 2011, it was 3.6%. In 2012, it was 1.7%. As we went through the next couple of years, it was 1.5%, 1.7%. In 2015, it was 0%. In 2016, it was 0.3%.
I'm sharing all those numbers because during those times, I was doing Social Security workshops and I had this section talking about the importance of the cost-of-living adjustment. I remember that 2016 year where it was 0.3%, coming off of a zero year, and everyone in the room was laughing. They were like, "What COLA adjustment? They never give us anything." People were audibly upset, and I don't blame them. It was a weird environment where they were getting 1%, 0%, 1.5% for nearly 12 years. Because it happened for that length of time, clients would come in, and we would be modeling retirement plans using an inflation amount of maybe 2% or 2.5%. They would say, "No, inflation won't be that high. It was zero last year." They would hate when we would model inflation into their retirement plan.
Then the year 2020 happened, and inflation hit our economy. The 2020 number wasn't crazy at 1.3%, but then I bet you remember—I remember going to Costco and it was like every week something got more expensive. I remember olive oil at Costco was like 60 or 70 bucks for a couple of things of olive oil. Anyway, in 2021, the cost-of-living adjustment was 5.9% for Social Security beneficiaries, and 8.7% in 2022. We've been riding this inflation wave down the past few years: 3.2%, 2.5%, 2.8%. I wouldn't be surprised if this upcoming year is very similar.
That's a long-winded buildup to this idea that there will be periods in your retirement where inflation probably won't be a huge issue, but there will be other times when inflation heats up and your Social Security benefit goes up by 5% or 6%. I remember in 2020 and 2021, the attitudes of our retirees shifted, and they said, "Oh yeah, inflation really is a killer. Things are getting more expensive. How are we supposed to afford this stuff?" It's another reason why getting filing for Social Security right is important. If you're married, optimizing filing strategies between spouses is really important because if we can maximize the higher benefit of the two, we know that is the guaranteed benefit—the benefit that's going to last as long as either spouse is alive. If we can maximize that one, we actually sometimes have a lot of flexibility with a younger spouse who would like to start their benefit early. But if we can get one of those benefits bigger, especially the one that's going to stick around, that's going to have a larger base in which this cost-of-living adjustment is going to be able to compound through retirement. I know 1%, 2%, or 3% a year doesn't feel amazing, but if we add those all up over a 25-year retirement, it's one of your best retirement assets, even if it's not your biggest.
Adam: Well, I think maybe to double-click on that at the end, I've heard you mention that Social Security and the survivor benefit can almost be viewed like insurance. Not like an insurance product like life insurance, but it operates in a similar way. Help me wrap my mind around that and maybe educate some of our viewers on why you say that and why you view it that way.
Garrett: I won't harp on this too long, but there's that famous phrase about comparing apples and oranges. I think sometimes we can get cute with the numbers. I have a lot of people who come in and say, "Hey, my Social Security benefit, I'd rather take that money now and invest it in the market." I think everybody's entitled to do that, although I don't think in my 13 years of working with retirees that I've ever actually recommended somebody take their benefits early in order to invest it and come out ahead over time. There's this question about whether Social Security is all about ROI (return on investment). If you don't need those benefits, can we just throw them in the market and outperform the cost-of-living adjustments and the survivor benefit features?
My general feeling is no. Let's not fit a square peg into a round hole. Social Security is a different asset other than just cash in your bank account. It has some extra features that I think warrant attention. If you have the flexibility of a large IRA or a Roth IRA—preferably a traditional IRA—if it was me, and for a lot of my clients I'm talking to, if you've got a $4 million traditional IRA and you're also wanting to take Social Security early, I think you're going to come out ahead most of the time if you pull out that $60,000 plus tax from a pre-tax traditional IRA or a 401(k) and let that Social Security benefit continue to grow. A lot of people I work with don't like seeing their investment portfolios go down. As a financial planner, I'm kind of okay with this idea that portfolio balances can go down for the first few years of retirement if we're allowing Social Security to grow.
I think the trap can be looking at Social Security like cash. Social Security should look more like this unique unicorn retirement asset that you have, which has this insurance component to it that could make a huge difference in a surviving spouse's lifetime and cash flow if you prioritize it correctly. I want to end my spiel here with this: I've learned anytime I'm talking about Social Security, you might have already tuned me out if you feel like Social Security is going to go broke before you get there. That can lead a lot of people to take Social Security at age 62 and not let it grow. My position—and this is a debatable position, I don't know the future any better than other people, though I keep my ear to the track to listen—my opinion is that I think Social Security will be there for your retirement. I think we would have broader financial issues in our country if that lifeline was pulled from a lot of people. They talk about cutting benefits, but in my 12 or 13 years of doing this, instead of cutting benefits, they keep making it better. We just got off the enhanced senior deduction, which wasn't "no tax on Social Security," but they're actually helping retirees have more money for retirement by issuing this kind of pseudo Social Security benefit. So they're going the other way, even though the trust funds are depleting. My hunch—again, this is purely speculative opinion—is that at some point they may end up doing a higher payroll tax. They may do something or maybe grandfather your cohort into retirement with those benefits. But at some point, Adam and I may have something attached to our Social Security benefit that will make that a more sustainable program. But if you believe Social Security is going bankrupt tomorrow, you're probably going to have a different conversation with me, and we might actually pivot from this idea of delaying until 70. I'm not here to tell you that you have to do that, but that foundational belief about the longevity of Social Security definitely factors into this. For most people, I'd recommend not operating out of fear, but with a prudent mindset.
Adam: Yeah, absolutely. Well, the Social Security conversation is always... I told you the other day, I was getting dinner with a buddy, and he was like, "Oh, we'll never see any of that." We were going back and forth on it. Everybody has their different opinions and thoughts on it, and in this day and age, it's a big topic. We appreciate you guys following along. If you've stuck around this long and you're thinking, "Man, I've already filed for Social Security, this was totally irrelevant to me," thanks for just listening to us, I guess. But my challenge for you—I've got a five-year-old and a three-year-old little boy at home, and a 10-month-old, and they love a challenge right now. If I'm like, "Hey, challenge, we're going to clean the whole house," they'll be like, "It's a challenge?" and I'm like, "Yeah, it's a challenge," and they do it. My challenge for you then, if you're like, "Hey, I've got the Social Security thing in the bag," go check out our year-end tax planning checklist over here over Garrett's shoulder. I'll have it down in the link below. Go to the website, throw in your email address, and we'll send you the download for that. That would be the next level of, "Hey, I got Social Security taken care of, but now what do I do each year in retirement?" That would be a great place for you to start and say, "Hey, I'm going to take my retirement to the next level. I'm going to accept the challenge from Adam, just like a five-year-old and a three-year-old. I'm taking the challenge, I'm doing this thing," and look through that. Along with that, you get free content each week, different case studies, different ways that we've utilized Social Security in retirement or helped people plan for Roth conversions. I think it's probably the best value on the internet right now. It's just tons of good free content. I know Garrett wouldn't toot his horn like that, but what Garrett's putting together for people, I think, is really, really valuable. You're going to get even better stuff than what we're doing here on YouTube.
Garrett: It's basically our tax planning checklist, then maybe like Wikipedia or something—that free resource. I think we're probably number one, but they're a close second.
Adam: Yeah, a close second. So, appreciate you guys checking us out—YouTube, Spotify, Apple Podcast. Check out our content, check out the website, Retirement Tax Matters. We appreciate you all listening and hope you guys are having a great day today. I'm Adam Reed. This is Garrett Crawford. We're Retirement Tax Matters.