The advantage of putting off Social Security benefits until your full retirement age is compelling: Wait long enough, and your patience is rewarded with the maximum benefit.

But many Americans face complex financial conditions or asset scenarios that defy that simple prescription. Whether it’s a heavy debt load, rising inflation, or long-term care costs, it can be tempting to dip into Social Security benefits long before the government promises the biggest return.

One strategy gaining attention among middle-class Americans for putting off Social Security until your full retirement age or FRA — 70 years old, under current rules — is a so-called “Social Security bridge.”

It’s a phased approach to retirement income that taps your 401(k) or other assets but avoids Social Security until you reach the FRA.

A common approach in bridging involves withdrawing funds from a 401(k) as soon as it’s possible to do so without triggering penalties, and only withdraw an amount equal to what you would pull from Social Security at age 62, the earliest age available.

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What does the research say?

A paper by researchers at the Center for Retirement Research at Boston College found that about one-third of workers could benefit from this bridging technique.

Researchers Alicia Munnell and Gal Wettstein found that middle- to upper-middle class citizens with about $250,000 or less in retirement savings could benefit by using their 401(k) assets to obtain “an amount equivalent to their Social Security benefits so they can postpone claiming benefits, thereby increasing their monthly payment when they do eventually claim.”

The Boston College study suggests workers would be inclined to participate in workplace-sponsored bridging programs, in which employers would make payments to retirees from their 401(k) accounts equal to their Social Security benefit if claimed.

“A Social Security bridge would help individuals reap the benefits of delayed claiming without having to alter their retirement age,” the paper concludes. “This simple approach would allow retirees to enjoy an income stream consistent with their expected lifelong benefit level while increasing that level through delayed claiming.”

That default option would be more likely to be maintained than if it were an annual elective, the study finds.

According to research by the Investment Company Institute, as of 2020, there were about 60 million active 401(k) participants. Many of them are middle-income earners, the sweet spot of earners most likely to consider a bridging approach as suggested by the research.

Psychology of tapping your 401(k)

Waiting for the maximum payout isn’t necessarily an easy decision.

Part of the challenge for current and would-be retirees is the psychology of a perceived “premature” dip into their 401(k) stash, which for many Americans represents the primary vehicle for retirement savings. Touching those assets early has long been considered a mistake under the presumption that the longer the funds stay invested in the market, the bigger the payoff.

But there’s a key consideration: 401(k)s will eventually run dry. Social Security — at least in theory — won’t run out.

Experts say that serious concerns about Social Security’s long-term viability aside, using 401(k) assets as a bridge to a bigger Social Security benefit makes sense.

Claiming Social Security at age 70 versus 62 — the earliest eligibility — translates to a massive increase in the monthly benefit. That amount is likely to be competitive with the return on 401(k) investment accounts, whose portfolios typically become more conservative as the holder ages.

Moreover, Social Security doesn’t face the same risk levels as a 401(k). The level of payout will remain static, with the age of the claimant the only significant variable.

Bridging isn’t risk-free. At least 38 states currently tax retirement distributions, and 401(k) holders who planned to use those assets to distribute funds to heirs could face an awkward choice.

Perhaps the biggest perceived risk associated with bridging is the ongoing concern over Social Security’s long-term health. Benefit-eligible citizens may be inclined to tap Social Security before its anticipated depletion year of 2035.

Experts caution against that, however, as Congress is likely to eventually take necessary steps to keep the program solvent.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.