Taking Social Security later is best, but how to ‘bridge’?

Delaying the start of Social Security benefits is a powerful way for retirees to cope with inflation, survive bad investment markets and reduce the risk they will run short of money.

The advantages of waiting are so great that financial planners often recommend their clients tap other savings, such as retirement funds, to help them delay claiming.

Employers could increase their workers’ financial security by offering a similar “bridge” strategy as part of 401(k)s and other workplace retirement plans, according to a study by the Center for Retirement Research at Boston College.

The bridge strategy would tap a worker’s retirement account to pay amounts roughly equal to the foregone Social Security checks.

People can create such bridges on their own. If Social Security projects your benefit at age 62 will be $1,500 a month, you could set up automatic monthly withdrawals of that amount from your 401(k) at retirement.

But having an employer offer the option could make the process easier and encourage more people to delay, says Gal Wettstein, the center’s senior research economist and co-author of the study.

Benefits of waiting are huge

People can claim Social Security retirement benefits at any time from ages 62 to 70.

Starting before your full retirement age, which is between 66 and 67, typically means settling for a permanently reduced benefit.

Delaying beyond full retirement age, by contrast, increases retirement benefits by 8 percent each year until your benefit maxes out at age 70.

Waiting until age 70 can increase your Social Security checks by at least 76 percent compared with starting at

62, Wettstein says.

“The higher monthly benefit means you have more guaranteed income, which will last you for the rest of your life,” Wettstein says.

By the way: Your Social Security benefits begin earning inflation adjustments starting at age 62, whether you’ve started receiving them or not, according to the Social Security Administration.

So next year’s 8.7 percent cost of living increase is no reason to speed up your application if you’re able to hold off.

Most people still claim too early

Research has shown that most people are better off waiting to claim Social Security. It’s particularly important for the higher earner in a married couple to delay, as that benefit determines what the survivor gets after the first spouse dies.

A study by economists from the Federal Reserve and Boston University found that “virtually all” U.S. workers ages 45 to 62 should wait beyond age 65 to claim, and 90 percent should wait until age 70, but only about 10 percent do.

Claiming too early will cost the typical worker over $182,000 in lifetime discretionary spending, the economists found.

Few retirement plans help

Many employers provide matches to encourage people to accumulate money for retirement, but few help with payout strategies when it’s time to retire, Wettstein notes.

A few offer the option to annuitize, which means turning some or all of the account balance over to an insurance company for a guaranteed stream of payments.

Most people don’t like the idea of giving up big chunks of their savings, Wettstein notes.

Figuring out when to claim Social Security is daunting enough for the average worker, let alone deciding how and when to tap retirement funds, he says.

An employer-provided bridge strategy could make waiting easier for many.