Which comes first: Social Security or IRA withdrawals?

From: financial-planning.com

It is a retirement dilemma.

When planning for retirement cash flow, should a client start Social Security as early as age 62, letting individual retirement account money continue to grow, tax-deferred? Or should that client tap the IRA and wait for a larger Social Security benefit?

A client who would receive $1,500 a month at 62 would collect $2,640 a month, plus any cost-of-living adjustments in the interim, by waiting until 70, the latest starting date.


“Many retirees claim Social Security too early,” says Mark Lumia, a CFP and the founder and chief executive of True Wealth Group in Lady Lake, Fla. “They may be reducing the longevity of their nest egg and increasing the tax burden.”

Why should clients take IRA distributions rather than Social Security benefits?

“Social Security gives an 8% credit every year benefits are delayed,” says Josh Mellberg, president and founder of J.D. Mellberg Financial in Tucson, Ariz. “That’s a rate that we aren’t seeing anywhere else now.”

Moreover, Social Security provides lifelong cash flow, with COLAs.

“Due to today’s threats of longevity and inflation, it can be in a client’s best interest to use qualified accounts to fund the early years of retirement while delaying Social Security,” Lumia says.

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