The Social Security Decision Is Not Made in Isolation. Here Is Why That Matters.
Part 4 of 6 in the State of Retirement Income 2025 Series
How you claim Social Security directly affects how much your portfolio can safely provide. The 2025 Morningstar research puts real numbers to the tradeoff.
Most people think about Social Security timing as its own separate decision. Claim early and get smaller checks sooner. Delay and get larger checks later. The break even analysis takes care of the rest.
What that framing misses is how deeply the Social Security decision connects to everything else in a retirement income plan. Morningstar's 2025 research models four different claiming scenarios and shows how each one affects both lifetime spending and what is left in the portfolio after 30 years.
How the Four Claiming Scenarios Compare
The base case: retire at 67 and claim immediately
Claiming Social Security at retirement generates $36,000 per year. At a 90% success rate, the portfolio supports $73,000 in first year income. This is the starting point against which all other scenarios are measured.
Claim at 62
Claiming five years early permanently reduces the annual Social Security benefit to about $25,200. The portfolio can only support $63,000 in first year income at the same success rate. Lifetime spending is the lowest of any scenario in the research. This is the option that feels conservative to most people. The data consistently shows it produces the worst outcomes across every measure.
Delay to 70, draw from the portfolio during the gap
Delaying increases the annual benefit to roughly $44,640. Drawing more from the portfolio during the bridge period supports $77,000 in first year income. But because the portfolio is drawn down more heavily in those early years, the median ending balance after 30 years is the lowest of any scenario. More annual income, less left over at the end.
Delay to 70, use a non-portfolio income source during the gap
Using part time work, rental income, or another asset to cover the bridge period supports $82,000 in first year income. Because the portfolio is not drawn down during the bridge, the ending balance stays nearly as strong as the base case. This is the highest lifetime spending of any scenario tested, with almost no cost to the legacy.
What the Research Concludes
Combining delayed Social Security with a flexible guardrails withdrawal strategy produces some of the strongest outcomes of all. The guaranteed, inflation adjusted nature of Social Security income provides a stable floor that reduces the volatility of a guardrails approach and allows the portfolio to flex more confidently in both directions.
For California educators with a CalSTRS pension, the coordination goes even deeper. Pension income during the bridge period can itself serve as the non-portfolio income source that makes the delay-to-70 strategy so effective. That combination, a pension covering expenses while Social Security grows, is one of the strongest retirement income foundations available. It is also one that most educators have never had modeled for them specifically.
The bottom line is that the bridge period funding source matters as much as the decision to delay. How you cover expenses between retirement and age 70 determines whether delayed claiming delivers its full benefit.
Next week in Part 5, we look at two tools that rarely come up in retirement conversations but that the research shows can meaningfully improve income outcomes: TIPS ladders and annuities.
Want to see how these claiming scenarios compare given your specific income picture? For California educators with a CalSTRS pension, Social Security timing coordinates with your pension income in ways that change the math significantly. Reach out and we can model what different claiming ages mean for your specific situation.
Alfred Edmonds is an Investment Advisor Representative at Cetera Investors in San Jose, CA. He specializes in retirement income planning for California educators, pre-retirees, and high net worth individuals. This content is for informational and educational purposes only and does not constitute financial, tax, or legal advice. References to Morningstar's State of Retirement Income 2025 report are for educational purposes only. Please consult a qualified financial professional regarding your specific retirement income strategy. A diversified portfolio does not assure a profit or protect against loss in a declining market.