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Key Takeaways

• Claiming early can unintentionally increase taxes, restrict Roth conversion opportunities, and raise Medicare costs for years.
• High earners benefit most from using the “golden window” between retirement and RMDs to optimize tax strategy before benefits begin.
• The best Social Security strategy is about aligning income, taxes, longevity, and family needs into one coordinated plan.

Many high earners hear the advice: “Claim Social Security at 62 and invest the difference.” The logic seems straightforward: take the money early, invest it, and come out ahead.

But after years of advising high-net-worth professionals, I’ve seen that conventional wisdom ignores the tax strategy you’ve spent decades building. And the real cost is far greater than most people realize.

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The Hidden Cost Nobody Mentions

When you claim Social Security at 62, you are not just accepting a reduced benefit for a few years. You are locking in a permanent 30 percent reduction for life. If your full retirement benefit at 67 is $4,000 monthly, claiming at 62 drops you to approximately $2,900 for life.

Many people assume they can invest the difference. In most cases, the after-tax returns do not catch up to a lifetime reduction in benefits.

• You are likely already maxing out tax-advantaged accounts.
• Any invested difference ends up in a taxable account.
• That creates more taxable income, not more efficiency.

The math becomes even less favorable once you consider the most overlooked factor: survivor benefits.

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When to Claim Social Security Benefits: The Survivor Benefit Game-Changer

Many high earners think about their own benefit and forget the impact on their spouse.

When you pass away, your spouse receives the higher of the two Social Security benefits, not both. If you claimed early and locked in that reduced benefit, your surviving spouse is stuck with that smaller amount for potentially decades.

But if you delay until 70, your benefit grows by 8% annually past your full retirement age, and that maximum benefit becomes your spouse's survivor benefit.

Let's put real numbers on this. For a high earner, delaying from 62 to 70 could mean the difference between your spouse receiving $2,900/month versus $5,000/month as a survivor benefit. Over a 20-year widowhood, that's over $500,000 in additional income, not counting inflation adjustments.

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Tax Planning for High Net Worth Individuals

Claiming Social Security early doesn’t just affect your monthly check. It can also quietly complicate your entire tax strategy.

Once Social Security turns on, your taxable income goes up, and suddenly things like:

• Roth conversions
• Long-term capital gains harvesting
• Strategic withdrawals from taxable and tax-deferred accounts
• RMD minimization
• Medicare IRMAA bracket management

…become much harder to do efficiently.

The Golden Window: A High Earner’s Best Friend

Between retirement and age 73, or 75, when Required Minimum Distributions (RMDs) begin, you have a valuable planning period known as the golden window. These years may be the only time in your life when you are not in a top marginal tax bracket.

This window allows you to reposition assets, reduce your long-term tax burden, and potentially save hundreds of thousands of dollars in lifetime taxes.

If you turn on Social Security at 62, you start to close this window prematurely. Waiting until age 68 through 70 creates opportunities such as:

Roth Conversions

When your earned income drops, you can convert pre-tax assets to a Roth at lower tax rates. This reduces future RMDs and supports more tax-efficient wealth transfer.

Tax-Adjusted Withdrawal Sequencing

With no Social Security income inflating your adjusted gross income, you can draw strategically from taxable accounts, IRAs, 401(k)s, Roth accounts, and equity compensation in an order that aligns with your long-term plan.

Avoiding Higher Tax Brackets

Early claiming increases your income and modified adjusted gross income. This can lead to higher Medicare IRMAA charges, reduced planning flexibility, and increased long-term tax drag. For high earners, these effects compound for decades.

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What If Social Security Runs Out Of Money?

A common concern is, “What if Social Security runs out of money?”

Even in a worst-case scenario where the trust fund is depleted, currently projected for 2034, ongoing payroll taxes are expected to cover about 80 percent of scheduled benefits. Congress has updated the system many times by adjusting retirement ages, tax caps, and benefit formulas. It is reasonable to expect future adjustments, but unlikely that benefits will disappear.

If you are earning one million dollars annually, you are not the demographic most vulnerable to potential changes. Your financial plan should be strong enough that concerns about insolvency do not dictate your claiming strategy.

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Social Security Full Retirement Age: Understanding the Real Break-Even

The break-even analysis often looks different for high earners. Someone who passes away around age 78 may indeed collect more total dollars by claiming at 62. However, most high earners are not optimizing for the highest total payout. They are usually focused on long-term wealth, tax efficiency, and survivor protection, which leads to a different conclusion.

There are situations where claiming early is appropriate. If you have significant health concerns that reduce your expected lifespan, claiming at 62 can be a practical option. If you need Social Security income to meet essential expenses, that is also a valid reason.

The best decision comes from analyzing your full financial picture rather than relying on generic calculators or fears about the future of the system.

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Finding Your Personal Strategy

There is no one-size-fits-all claiming age. The better question is, “What am I optimizing for?”

Before claiming Social Security, high earners should consider:

• Do I want to maximize longevity based benefits or preserve early flexibility?
• How important is survivor income for my spouse?
• How large is my tax burden when RMDs begin at age 73?
• Do I want a coordinated 20 year tax plan or a simple set it and forget it approach?
• How will I bridge income if I delay, for example, through portfolio withdrawals, deferred compensation, business proceeds, or real estate income?
• What is the long-term cost of locking in a lower benefit for life?

Social Security is an income decision, a tax decision, a longevity decision, and a family decision. For high earners, the optimal answer is usually found where all four considerations meet.

Check out my YouTube video, If I Claimed Social Security Again, I’d Do This Instead, for a more in-depth look at when to draw your Social Security benefits.

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Frequently Asked Questions (FAQs)

Q. How do I decide the best age to claim Social Security?

A: The optimal age depends on factors like longevity expectations, income needs, tax planning opportunities, and whether maximizing survivor benefits is a priority.

Q: Does delaying Social Security really make a big financial difference?

A: Yes. Delaying benefits past full retirement age increases payments by roughly 8% per year, which compounds over a long lifespan and can significantly strengthen long-term retirement income.

Q: What happens to my Social Security benefit if I claim early and change my mind?

A: You have a one-time option to withdraw your application within 12 months of claiming, but you must repay all benefits received (including spousal benefits). After that window closes, your reduced benefit is permanent.

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