Why Wealthy Retirees Are Draining Their 401(k) Early to Lock In a Bigger Social Security Check at 70

A 63-year-old with $1.4 million in a traditional 401(k) who delays Social Security to 70 can collect $3,720 per month instead of $3,000 at full retirement age, but funding that delay through 401(k) withdrawals creates a tax problem that can offset much of the gain.

The Benefit Gap Compounds Over Time

Using the 401(k) as a Bridge Reduces RMDs

Drawing the 401(k) down from 62 to 70 to cover living expenses funds the bridge period without requiring Social Security and reduces the account balance subject to required minimum distributions starting at age 73.

A $1.4 million 401(k) at 62, drawn at $60,000 per year for eight years with a 5% annual return on the remaining balance, arrives at age 70 with a smaller balance than one left untouched. That smaller balance produces smaller RMDs, which means less ordinary income forced into the tax calculation each year after 73. Withdrawals simply replace income the retiree would have needed anyway, reducing the taxable account balance without triggering a separate conversion event.

The Tax Cascade That Derails the Strategy

The bridge-withdrawal approach works cleanly only if annual 401(k) draws remain below two critical thresholds. The first is the Social Security combined income threshold. Once provisional income (adjusted gross income plus half of Social Security) exceeds $34,000 for single filers or $44,000 for joint filers, up to 85% of Social Security benefits become taxable. During the bridge years before Social Security begins, this isn’t a concern. But at 70, when both RMDs and the larger Social Security benefit arrive simultaneously, combined income can push into taxable territory.

The second threshold is IRMAA. Because Medicare uses a two-year MAGI lookback, a large 401(k) withdrawal at 65 affects Medicare premiums at 67. The 2026 IRMAA surcharge for a single filer begins at approximately $109,000 in MAGI and adds roughly $1,300 per person per year at Tier 1 (Part B + Part D combined), rising to over $7,000 per person per year at the top tier. A married couple hitting Tier 2 together pays an additional $5,772 per year in Medicare surcharges. The standard Part B premium is $202.90 per month in 2026, and IRMAA layers on top.

Keeping annual 401(k) draws below the first IRMAA threshold preserves the standard premium. Exceeding it by $1 triggers the full Tier 1 surcharge, not a gradual increase.

The Spousal Coordination Angle

A lower-earning spouse can claim Social Security early at 62 to provide household income while the higher earner delays until 70, maximizing the couple’s combined lifetime benefit. This structure reduces the 401(k) draw required during the bridge period, since one Social Security check already covers part of the household expenses. The household retains some income regardless of portfolio performance. With the 10-year Treasury yielding around 4.3%, intermediate fixed income can anchor the bridge portfolio while equities continue to grow, providing both safety and capital preservation.

For income during the bridge period, Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD | SCHD Price Prediction) currently yields around 3.3%, while JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) yields near 8%, providing different income profiles depending on how much the retiree needs to generate from withdrawals.

Three Steps Worth Taking Now

1. Pull your Social Security statement at ssa.gov and calculate the exact monthly benefit at 62, 67, and 70. The difference between your full retirement age benefit and your age-70 benefit is the annuity you are purchasing with each year of delay. Compare that implicit return against what your 401(k) is likely to earn.
2. Model your projected MAGI during bridge years using your expected 401(k) draw. If that figure approaches $109,000 for a single filer or $218,000 for a married couple filing jointly, the IRMAA surcharge two years later is a real cost that needs to be factored into the math. A fee-only advisor can run this calculation with full income projections.
3. Check whether a spousal coordination strategy applies. If one spouse has a substantially lower earnings record, early claiming for that spouse while the higher-earning spouse delays can reduce portfolio dependency during the bridge period and permanently increase the survivor benefit.