What is a Social Security bridge strategy? How it works & when it makes sense

You’ve spent years saving for your future and laying out a financial strategy for supporting everything that matters to you most. Now that retirement is getting closer, you have another decision to make: When should you start Social Security?

You can start receiving Social Security retirement benefits as early as age 62. But waiting until your full retirement age or longer, up to age 70, can mean a larger monthly benefit.

What happens if you retire before you’re ready to start Social Security? How do you pay the bills while you wait? How do you ensure your retirement decisions now support your financial plan down the road?

One option is a Social Security bridge strategy. The basic idea is simple: You lean on your savings for a few extra years, so your benefits have more time to grow. It sounds straightforward, but there’s more to consider than simply deciding when to claim Social Security. Your savings, taxes, investments, Medicare costs and plans for retirement all play a role.

Here’s how a Social Security bridge strategy works and what to think about before you use one.

A Social Security bridge strategy is a way to use your retirement savings or other income sources to cover your expenses while you wait to claim your benefit. Think of it as a bridge between the day you retire and the day you start Social Security.

Why do people wait in the first place? Because delaying Social Security can increase your monthly benefit later. For example, if you were born in 1960 or later and your full retirement age is 67, claiming at 70 would give you 124% of your full retirement benefit. That larger benefit can be especially valuable if you live a long time, since Social Security provides inflation-adjusted income for as long as you live.

The trade-off is, you'll need to rely on your own savings or other sources of income to cover your expenses until you start receiving Social Security. That’s why a bridge strategy isn’t automatically better than claiming Social Security earlier. It’s one option to consider as you build your retirement income plan.

For example, say you retire at 62 and need $4,000 a month to cover your expenses. Your full Social Security retirement age is 67, but you can choose to claim benefits earlier or later. Here's how those different claiming ages could affect your monthly benefit.

Here’s how the numbers might look:

Assuming your monthly expenses stay at $4,000, claiming at 62 would leave you with $2,250 to cover through savings or other income sources each month. That gap shrinks to $1,500 if you claim at 67 and just $900 if you wait until 70.

These amounts are hypothetical and reflect what you'd need to cover after Social Security benefits begin, not during the bridge years. Your actual benefit will depend on your earnings history, birth year and claiming age. You can sign into your Social Security account to see your estimated benefit at different claiming ages.

Now, let's look at what you'll need to cover while you wait to claim Social Security. Using our example of $4,000 in monthly expenses, waiting until 67 means you’ll need to cover five years of expenses, or $240,000 in this simplified example. If you wait until 70, you’re looking at eight years at $4,000 per month, or $384,000.

That doesn’t mean you need $384,000 sitting in cash. You may have other sources of income, such as a pension, part-time work or investment income. And your spending probably won’t stay exactly the same every month. The point is to understand how you'll cover your expenses until Social Security benefits start.

You’ll also want to think about which accounts you’ll draw from to help cover expenses. Taking money from a taxable investment account, traditional IRA or Roth IRA can have different tax consequences.

Once you reach the age you’ve chosen, Social Security becomes part of your retirement income. That means you may need to rely less on your savings or other income sources to cover expenses going forward.

One more detail to keep in mind: Waiting on Social Security doesn’t mean waiting on Medicare. Even if you’re delaying your benefits, the Social Security Administration recommends you sign up for Medicare at age 65, when most people become eligible. Some exceptions apply, including if you have qualifying employer health coverage.

There isn't one right claiming age for everyone. Some people need to claim at 62, others want to hold off as long as they can, and plenty land somewhere in between. Any of those can be a good choice, depending on your health, family, other income and what you want retirement to look like.

Whatever you choose, the age you claim determines your monthly benefit, so it's worth thinking through your options before you decide.

A bridge strategy may be worth considering if you have enough savings to cover your expenses for several years and want a larger monthly Social Security benefit later in retirement. It also may be worth exploring if you’re concerned about running out of money later in life. A larger monthly benefit can be one way to address the risk of living longer than expected.

For married couples, there’s another consideration. If the higher earner delays Social Security, the couple may be able to create a larger survivor benefit for the spouse who lives longer.

A bridge strategy may not make as much sense if you need Social Security to cover essential expenses right away. It also may not fit if using your savings for several years would leave you without enough flexibility for unexpected expenses or market downturns.

And remember: You don’t have to choose between age 62 and age 70. You can start benefits at any age in between.

Here’s something to think about before you decide to use a bridge strategy. Imagine you retire at 62 and plan to wait until 70 to claim Social Security. A year later, the stock market drops.

You still need money to pay your bills. If you’re selling investments while the market is down, you may be selling assets at a loss. That can make it harder for your portfolio to recover.

At that point, you might be tempted to start Social Security earlier than planned. That may be the right decision for you. But it’s better to think about that possibility before a downturn happens.

For example, you might keep some money in cash or other lower-risk investments to cover near-term expenses. You also might decide ahead of time which expenses you could reduce if the market falls. The goal isn’t to predict what the market will do. It’s to give yourself some flexibility if it doesn’t behave the way you hoped.

The years between retirement and claiming Social Security can affect more than your monthly benefit. They also can be an opportunity to think about taxes, retirement accounts and future Medicare costs.

Once you stop working, your income may be lower than it was during your career. That may create an opportunity to convert some money from a traditional IRA to a Roth IRA. A Roth conversion generally increases your taxable income for the year you make the conversion, so you’ll want to consider how much you convert and how it affects your overall tax situation.

For example, you might use other savings to pay your living expenses while converting a portion of your traditional retirement savings to a Roth IRA. That can give you another source of potentially tax-free retirement income later. But a Roth conversion won’t be the right move for everyone, so your tax bracket, income and long-term goals all matter.

Required minimum distributions, or RMDs, are another part of the picture. Under current federal rules, you generally must begin taking RMDs from traditional IRAs and many retirement plans at age 73 or 75, depending on your birth year.

Withdrawing from traditional IRAs during your bridge years can reduce their balances, potentially lowering your required minimum distributions later.

That said, spending your traditional retirement savings first isn’t the right call for everyone. Here too, it depends on your tax situation, investment strategy and plans for your money.

There’s another connection you may not expect: Your income can affect what you pay for Medicare.

Medicare generally looks at your modified adjusted gross income from two years earlier when determining whether you’ll pay an income-related monthly adjustment amount, known as IRMAA, for Medicare Part B and Part D. That means a large Roth conversion could affect your Medicare premiums later.

For example, if you’re 63 and make a large Roth conversion that significantly increases your income, that income may be used when Medicare determines your premiums at age 65.

That’s why it can help to look at Social Security, retirement account withdrawals, Roth conversions and Medicare together. They may feel like separate decisions, but a change to one can shift the numbers for the others.

A Social Security bridge strategy isn’t about chasing the biggest possible check. It’s about deciding how you want to use your resources throughout retirement. Some people will decide that a larger benefit later is worth drawing on their savings sooner. Others will decide that claiming earlier gives them the income and flexibility they want today. Either way, it helps to look beyond the Social Security check.

Ask yourself:

• How much will I need to spend each month?
• How much can I comfortably withdraw from my savings?
• Which accounts should I use first?
• Should I consider a Roth conversion?
• How could my income affect future Medicare premiums?
• What happens to my plan if the market drops?
• How would my Social Security decision affect my spouse?

Your Social Security decision can affect your taxes, investment withdrawals and income later in retirement. That's why it helps to consider these decisions together rather than one at a time.

A Thrivent financial advisor can help you weigh these decisions and explore how different approaches could fit your goals, priorities and financial situation.