Protecting Your Portfolio: Why Claiming Social Security Early Can Be the Safer Move

Sequence-of-Returns Risk, Opportunity Cost, and the Case for Portfolio Preservation

In the first post of this series, we established a foundational idea: Social Security should never be viewed in isolation. Maximizing your monthly benefit doesn’t always mean maximizing your total financial picture. In this post, I want to dig deeper into one of the reasons why—and it has everything to do with what’s happening inside your investment portfolio.

The conventional advice to delay Social Security until 70 carries an implicit assumption: that drawing down your portfolio in the meantime is a manageable tradeoff. For many people, it can be. But for others—depending on market conditions, portfolio size, and spending needs—that early drawdown can inflict real and lasting damage. Understanding that risk is essential to making a genuinely informed claiming decision.

The Hidden Danger: Sequence-of-Returns Risk

Retirement investing is fundamentally different from accumulation-phase investing, and one of the biggest reasons is something called sequence-of-returns risk. The concept is straightforward: it’s not just your average returns that matter—it’s when those returns happen.

If you retire and immediately face a significant market downturn—think 2000 to 2002, or 2008—while simultaneously withdrawing heavily from your portfolio to cover living expenses because you’re delaying Social Security, you can find yourself selling shares at exactly the wrong time. Those early losses compound in reverse: your portfolio has less capital to participate in the eventual recovery, and the damage can be permanent.

By claiming Social Security earlier—even at a reduced rate—you create an immediate stream of income that reduces how much you need to pull from your investments. If markets take a dive in your early retirement years, you’re not forced to liquidate as aggressively. Your portfolio retains more capital, which gives it a better chance of recovering when conditions improve.

I’ve seen this play out in real planning scenarios. Clients who had a Social Security check coming in during a market downturn, which resulted in fewer withdrawals from their portfolio, were able to maintain higher portfolio balances through retirement.  Some investors find a higher account balance more reassuring than a higher Social Security check. 

Rethinking Breakeven: The Role of Opportunity Cost

In the previous post, I mentioned that standard breakeven analysis—the comparison of cumulative benefits at different claiming ages—tends to put the crossover point somewhere around age 78 to 80. If you live past that age, delaying “wins.” If you don’t, claiming early was the better move.

But that calculation leaves out something important: the opportunity cost of the portfolio withdrawals you made while waiting.

When you withdraw $50,000 from your portfolio to bridge the gap while delaying Social Security, you’re not just losing $50,000. You’re losing the compounding growth those dollars would have generated over the next ten, twenty, or thirty years. If your portfolio is earning a modest return—say 4 or 5 percent—the true breakeven age can push out significantly, sometimes to age 90 or beyond.

That doesn’t mean delaying is always a mistake. But it does mean the math is more nuanced than most online calculators suggest. And when you factor in real-world portfolio returns, the case for claiming early gets stronger than many people expect.

Stress-Testing the Decision

One of the most valuable things I do with clients when evaluating Social Security timing is stress-test the decision against some of history’s toughest economic periods. This isn’t about predicting the future—it’s about understanding how your plan holds up when markets are volatile.

Imagine a retiree with a $1 million portfolio who retires at 62 and needs $60,000 a year to live. Under a delay strategy, they’re pulling the full $60,000 from their portfolio for eight years while waiting for that larger Social Security check at 70. Under a claim-early strategy, they receive roughly $24,000 a year from Social Security starting immediately and only need to withdraw $36,000 from the portfolio.

Now layer in a market downturn—something like the 2000 to 2002 crash—hitting right at the start of retirement. Under the delay strategy, the portfolio is absorbing both heavy withdrawals and steep market losses simultaneously. By the time that higher Social Security check arrives at 70, the portfolio may be significantly diminished. Under the early-claiming strategy, the lower withdrawal rate gives the portfolio more room to absorb the downturn and participate in the recovery. By age 85, the early claimer may actually have more total wealth—not less—because the investments had more capital and more time to compound.

These aren’t hypothetical exercises. Running your specific numbers through scenarios like the Great Depression, the stagflation of the 1970s, or the Great Recession reveals exactly how sensitive your plan is to early market conditions—and whether your claiming strategy provides the resilience you need.

There’s No One-Size-Fits-All Answer

I want to be clear: I’m not arguing that everyone should claim Social Security early. There are situations where delaying makes excellent sense—especially when the portfolio is large enough to comfortably fund the bridge period, or when maximizing survivor benefits is the priority (which we’ll explore in the next post).

What I am arguing is that the decision deserves more than a rule of thumb. It deserves a rigorous look at how your claiming age interacts with your portfolio’s ability to sustain your lifestyle through a range of market environments. That means factoring in your expected rate of return, your withdrawal needs, and your tolerance for early-retirement portfolio risk—not just the size of the monthly check.

The clients I work with find real clarity in seeing these scenarios laid out side by side. When you can see the projected portfolio balance at age 80, 85, and 90 under different claiming strategies and different market conditions, the decision stops feeling abstract. It becomes grounded in your actual numbers and your actual life.

Coming Next: Strategies for Couples and Survivors

So far, we’ve been looking at Social Security primarily through the lens of an individual decision. But if you’re married, the picture changes dramatically. Your claiming strategy isn’t just about you—it’s about protecting your spouse for the rest of their life.

In the next post, Couples, Survivors, and the Art of Coordination, we’ll explore how couples can coordinate their claiming decisions to balance household income today with survivor protection for tomorrow—and why the higher earner’s claiming age may be the single most important decision in your retirement plan.

Tad Jakes, CFP®, EA, ECA

Disclaimer: The Social Security rules, figures, and economic scenarios referenced in this post are intended to be illustrative and educational. Actual outcomes will vary based on individual circumstances, market conditions, and future policy changes. This post does not constitute personalized financial, tax, or legal advice. Please consult a qualified financial advisor and tax professional regarding your specific situation.