Kevin Lum: Delaying Social Security Isn't Always Wise — or Affordable
Retirees are often told to delay claiming Social Security as long as possible to maximize their monthly benefit. But finance expert Kevin Lum says that advice can fall apart if retirees don’t have the portfolio, cash flow or flexibility to realistically sustain waiting.
In a recent YouTube video, Lum explored whether every retiree can truly afford to delay Social Security, arguing that the “best” claiming strategy depends on circumstances.
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Delaying Social Security Can Put Pressure on Your Portfolio
Many retirement calculators make delaying Social Security seem ideal because larger monthly benefits can significantly increase lifetime income. However, Lum pointed out that retirees who stop working early and delay benefits may need to rely heavily on investment accounts to cover living expenses, leaving them exposed to market swings.
“If you retire early and you push your Social Security benefit off to age 70 and then the market tanks and you're pulling out 11%, 12% a year, it can be very ruinous to your portfolio,” he said.
High withdrawal rates during a downturn can permanently damage retirement savings, because retirees may be forced to sell investments when markets are depressed.
“If you have a bad market early in your retirement, they can end up wiping out most of your portfolio long before the Social Security check ever rise,” Lum said.
He also compared delaying benefits with claiming earlier. Someone delaying Social Security may need to withdraw roughly $40,000 annually from investments, while claiming a roughly $1,500 monthly benefit at age 62 could reduce withdrawals closer to $22,000 annually.
“Delayed until age 70 might look great in a spreadsheet and just not be realistic in real life,” he said.
Blanket Social Security Advice Often Ignores Real-Life Risks
One of Lum’s biggest criticisms of Social Security advice is that it often oversimplifies retirement planning without accounting for real-world uncertainty.
“Whatever decision you made, you want to make sure you stress test it,” he said.
Lum recommended retirees use retirement software to model different scenarios and evaluate the impact of unexpected market swings.
He also compared retirement planning to solving a puzzle, where every financial decision affects multiple other parts of the plan. Delaying Social Security may increase future guaranteed income, but it can also require retirees to spend down investment accounts more aggressively in the meantime.
Lum noted that retirees often overlook the tradeoff between maximizing Social Security and preserving liquid assets or inheritance value. Unlike investment accounts, Social Security does not leave behind money for heirs.
“Know your numbers. There's no universal rule of thumb that everyone should follow,” he said.
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Taxes, Medicare and Working Can Complicate the Decision
The timing of Social Security affects more than just monthly income, Lum explained. Claiming decisions can ripple across taxes, Medicare planning and employment income during retirement.
For example, delaying benefits can sometimes create a temporary lower-income window that may help retirees complete Roth conversions or realize investment gains at lower tax rates before required minimum distributions begin.
“Claiming early while you're working can create some surprises for you if you don't understand the rules,” however, Lum said.
He also warned that many retirees misunderstand Medicare timing. Delaying Social Security does not automatically delay Medicare enrollment and many retirees still need to address Medicare around age 65 even if they plan to wait until 70 to claim benefits.
The Best Claiming Strategy Depends on Your Goals
Lum ultimately argued that retirees ask the wrong question when they focus only on the “best” age to claim Social Security. Instead, he says retirees should first identify what financial problem they are trying to solve.
“If your goal is to maximize lifetime income and you expect to live a long time, delay,” he said. “But if your goal is to reduce pressure on a modest portfolio and cover expenses now because you can't work another day, maybe you should go ahead and claim early.”
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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