Social Security is an incredible benefit. It’s inflation-adjusted income. It’s tax-efficient income. It includes spousal and survivor benefits. And for many retirees, it becomes one of the most valuable financial assets that they have. But determining the best time to start Social Security is more complicated than simply using an online calculator that tells you how to get the largest check.
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Transcript:
473 – 2026 Retirement Challenge- Social Security. What Are We Really Optimizing For?
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Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.
Jason Parker: America, welcome back to another round of Sound Retirement Radio.
I’m so glad to have you tuning into this episode. It’s number 473 and the title is The 2026 Retirement Challenge: Social Security. What are we really optimizing for? As we get into this case study, I wanna start with an important reminder. This is not advice for your specific situation. Every retirement plan is unique.
Your plan is like a fingerprint. It’s personal to you. What makes sense in this hypothetical example that I’m gonna share with you may not be what’s best for your life, and that’s really one of the most important parts of retirement planning, is first understanding what’s most important to you. Before we optimize a plan, we need to understand what we’re optimizing for.
Social Security is an incredible benefit. It’s inflation-adjusted income. It’s tax-efficient income. It includes spousal and survivor benefits. And for many retirees, it becomes one of the most valuable financial assets that they have. But determining the best time to start Social Security is more complicated than simply using an online calculator that tells you how to get the largest check.
Before I get into today’s show about optimizing Social Security, let’s start out by renewing our minds. This verse comes to us from Romans chapter 8 verses 38 and 39: “For I am convinced that neither death nor life, neither angels nor demons, neither the present nor the future, nor any powers, neither height nor depth or anything else in all creation will be able to separate us from the love of God that is in Christ Jesus, our Lord.”
And then, of course, something fun to make your family roll their eyes. I know I get a lot of roll — I get a lot of eye-rolling from my family these days. But if April showers bring May flowers, what do Mayflowers bring? Pilgrims. What do you call a snowman in May? A puddle. What’s the shortest month? May.
It only has three letters.
Most Social Security calculators only solve for one variable: how to maximize your Social Security benefits. But retirement planning is bigger than that. Taxes matter. Portfolio withdrawals matter. Survivor income matters. Investment risk matters. Net worth matters. Taxes matter, and most importantly, your life matters.
When we build retirement plans, there are several different things we can optimize for. We could optimize for how to get the most lifetime income from Social Security, how to pay the least amount of money in taxes over your lifetime- Leaving behind the highest net worth to your heirs or creating the lifestyle that allows you to enjoy retirement the most.
And those goals don’t always point to the same answer. One of the mistakes I see people make is evaluating Social Security claiming decisions in isolation without understanding how all the other moving parts are working together. But there’s another layer to this conversation that I think is easy to miss.
Sometimes, especially as advisors, we become so focused on optimizing the numbers that we forget that the purpose of the numbers in the first place. Taxes, Social Security, investment returns, how much money you have left at the end of your life, that’s all really important, and they provide a framework for making prudent financial decisions.
But your retirement plan is not just a math problem. Your life is not a spreadsheet. And sometimes the mathematically optimal strategy may not actually create the best life. What if starting Social Security earlier allows you to travel more in your early retirement years? What if it reduces your anxiety about the stock market?
What if it allows you to spend more time with your kids and your grandkids while everyone is still healthy and active? Tim and I were recently having a conversation about this very topic, and I’ve met with hundreds of people doing retirement planning, having these conversations with families over the years.
And when we ask people what matters most, almost nobody says, “I wanna die with the highest possible net worth.” People usually say, “I don’t wanna run out of money in retirement. I want peace of mind. I want flexibility. I want to enjoy retirement. I wanna take care of my spouse. I wanna spend time with my family.”
And those are all very different goals. Leaving money behind, minimizing taxes, and maximizing benefits are all worthy objectives, but they should usually be secondary, not primary. The primary goal should be: how do we use money to help you live a great life? There’s another important distinction here, lifespan versus healthspan.
As advisors, one of the conservative things we do is we build plans that project all the way out to age 100. That helps us stress test the plan. But in real life, many people never reach those later years, and even for those who do, their lifestyle often changes really dramatically over time. In my experience, retirees in their late eighties and nineties, usually they’re not traveling.
They split a meal when they go out. They don’t drive as much. They’re not as engaged and active in the hobbies and the sports and the hiking and the pickleball and the things that they just love. They often spend less, and life just gets simpler, quieter. My friend Dean, his mom lived to age one hundred, and all she had at the end was her Social Security income.
And she was able to save money every month and still give to her church only based on her Social Security. And Dean used to think, “How in the world could she do it?” ‘Cause at the time, I think she was only getting one thousand three hundred dollars per month, and she was able to pay her bills, buy food, do the things she wanted to do, give to her church, and save.
That seems crazy to me, but that was her reality. So while delaying Social Security can absolutely function as longevity insurance and in many cases may be financially beneficial, we also need to ask, what are we sacrificing today in order to create more income decades from now? That’s not a reason to start early or late.
It’s simply a reminder that retirement planning should balance both future security and present enjoyment, fulfillment. So with that framework in mind, let’s walk through a hypothetical example. Here’s my case study. John was born in June of nineteen sixty-four, and by the end of twenty twenty-six, he’s gonna be sixty-two years old.
Nancy was born in April of nineteen sixty-five. By the end of twenty twenty-six, she’s gonna be sixty-one years old. They have one million dollars in his 401, six hundred thousand dollars in a brokerage account, a paid-off home that’s worth six hundred and fifty thousand dollars, and they have no mortgage.
Nancy’s already retired. John is still working, he earns ten thousand dollars per month, but he plans to retire on December thirty-first of twenty twenty-six at full retirement age of sixty-seven. Now, sixty-seven isn’t the age he’s gonna retire. That’s just when he’s eligible for Social Security benefits without any reduction to his benefits.
So at sixty-seven, his Social Security benefit would be three thousand dollars per month. And for Nancy, at age sixty-seven, her full retirement benefit from Social Security would be two thousand dollars per month. Their retirement spending goal is to spend eight thousand dollars per month or ninety-six thousand dollars per year right from the get-go, and then, of course, we have to be making assumptions about how that spending’s gonna change over time due to inflation.
And like many retirees, they’re trying to determine the best time to start Social Security. If they start benefits at age sixty-two, they’ll have more guaranteed income right away. They’ll need smaller withdrawals from their investments early in retirement, but their benefits will be permanently reduced by approximately thirty percent.
If they wait until age sixty-seven, their full retirement age for Social Security, they’ll need larger portfolio withdrawals between age sixty-two and sixty-seven, but they’ll receive the full benefit amount without any reductions. And then of course, they could delay all the way till age seventy. Doing so means that they receive delayed retirement credits.
Their benefits will increase by roughly eight percent per year after their full retirement age, resulting in approximately one hundred and twenty-four percent of their full retirement age benefit at age seventy. And of course, there’s no reason that would benefit them to start Social Security later than age seventy.
Now, remember, Social Security is inflation-adjusted income. It also tends to be tax-efficient income. So this decision is complicated. There are a lot of moving parts, and for many retirees, when they start Social Security can have a huge impact on their confidence, their portfolio longevity, how much money they pay in taxes, the survivor benefit and how secure their spouse will be, and then also lifestyle flexibility.
And that’s why some people refer to when you start Social Security as a one hundred thousand dollar decision. So we’re gonna look at three different options. Strategy number one is to maximize lifetime Social Security income. That’s what most of the calculators out there, that’s the only thing they look at is how do you maximize Social Security income over two people’s lifetimes?
If we optimize for the highest lifetime Social Security income based on average life expectancy, John would start his benefit at age seventy, and Nancy would start hers at sixty-nine and four months. The results are their lifetime Social Security would be one million, seven hundred and fifty-nine thousand and forty-four dollars.
Their lifetime taxes would be two hundred and twenty-nine thousand, two hundred and two dollars, and their liquid net worth at the second person’s death would be eight hundred and forty-six thousand, nine hundred and thirty-three dollars. The second strategy that we’re gonna look at is how do we maximize the total net worth at the second person’s life expectancy, at the second person’s death?
So if we want to optimize for the highest liquid net worth remaining at the second spouse’s death, John would start his benefits at sixty-eight and five months. Nancy starts hers at age sixty-four and seven months. The results are that lifetime Social Security would be one million, six hundred and sixty-nine thousand, two hundred and twenty-two dollars.
Lifetime taxes would be two hundred and thirty thousand, nine hundred and forty dollars, and the liquid net worth at the second person’s death would be nine hundred and ninety-two thousand, sixteen dollars. The third strategy we wanna look at is what if you just start Social Security as early as possible?
This is the option that most people choose. Both begin benefits at sixty-two and one month. The results were their lifetime Social Security was one million, three hundred and eighty-one thousand, seven hundred and thirty-six dollars. Lifetime taxes were two hundred and forty-one thousand, eight hundred and thirty-eight dollars, and their liquid net worth at death is seven hundred and thirty thousand, eighty-two dollars.
Interestingly, this strategy produces the lowest lifetime Social Security income, the highest lifetime taxes And the lowest ending net worth. Yet according to the Social Security Administration, age sixty-two remains the most common claiming age. So what should people do? And this is where retirement planning becomes really deeply personal.
Optimizing for numbers alone can sometimes be misleading. For example, if we only look at total lifetime Social Security benefits using nominal dollars, we ignore something important. A dollar received at age sixty-two is more valuable than a dollar that’s received at age seventy. This is the time value of money.
Some advisors apply discount rates to adjust for purchasing power and timing differences. But even then, you’re still only optimizing for part of the equation. You’re still primarily solving for Social Security, and maybe that isn’t actually your highest priority. If your real goal is freedom, confidence, flexibility, family experiences, generosity, reduced stress, or simply enjoying your healthiest retirement years, then the mathematically best strategy may not necessarily be the emotionally best strategy.
That doesn’t mean the numbers don’t matter. They absolutely matter, but the purpose of money is to support your life, not the other way around. At the end of the day, retirement planning isn’t really about maximizing Social Security. It’s about aligning financial decisions with what matters most to you because someday, none of us will care what our ending net worth was, but we will care deeply about how we spent our time, who we shared life with, the memories we created, and whether we truly lived while we had the health and the opportunities to do and maybe the most important retirement planning question isn’t how do I maximize my benefits? Maybe the better question is, what kind of life do I want my money to help me live?
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For general information only and should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program.
Parker Financial, its representatives, or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance-related discussions are subject to the claims-paying ability of the company. Investing involves risk, in- Jason Parker is the president of Parker Financial LLC, an independent fee-based wealth management firm located at 9230 Bayshore Drive Northwest, Suite 201, Silverdale, Washington.
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