The question is simple: should you draw down your 401(k) to delay Social Security? The answer is simple too — but only if you know one number.
Your benefit grows at a rate of 8% per year if you hold off on claiming it past full retirement age, which lands at 67 for those born after 1960.
What the 8% Figure Actually Means
These credits get figured out each month by the Social Security Administration. That means putting off your claim by even a single month past age 67 will give you a slightly bigger benefit.
This is a guaranteed gain. The assets in your 401(k) may or may not keep up with it. The S&P 500 has delivered an average return of 10% historically, per Fidelity, but there’s no way to predict the return you’ll get between 67 and 70.
“The assets in your 401(k) may or may not be able to keep up with this fixed return.”
Why 90% of Workers Win by Delaying
A 2022 paper by David Altig, chief economic advisor at the Federal Reserve Bank of Atlanta, found that delaying benefits until age 70 is beneficial for 90% of U.S. workers.
The numbers clearly favor waiting for the credits, even though skipping three years’ worth of monthly checks is something few can manage.
The Catch: Millions Take Benefits Early
Many people in the United States take their benefits before they are due, sometimes because money is tight and sometimes because they simply do not know any better. Putting off those payments for three full years can sound simple on paper, but it is rarely easy when there is no monthly check coming in.
The Guaranteed Gain vs. Market Risk
The key trade-off is straightforward:
Past full retirement age, your Social Security grows at a fixed 8% annually. Your 401(k), however, carries no such promise, and its prior results don’t forecast what comes next.
In general, holding off is the wiser choice for most individuals, though personal situations differ greatly from person to person.
Individual Circumstances Matter
Most workers will find the guidance applies to them, though some will not. For those who can delay claiming Social Security and get by on their 401(k) instead, the numbers usually add up well in their favor. For anyone who needs that monthly payment right away, the sacrifice becomes a much tougher call to make.
The Bottom Line
The bottom line is that the 8% growth rate is real, reliable and belongs to you — and so does the choice about whether to claim early or wait. The numbers support waiting in almost every case, but your own situation determines whether you can afford to do it.
Sources and Caveats
The cited figures (S&P 500 average return of 10%, per Fidelity; Altig’s 2022 paper) are sourced to third parties and should be treated as claims rather than established facts.
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