Aug 16, 2025
It’s easy to assume that a person’s retirement age and the age they start claiming Social Security neatly coincide. However, for many retirees, that’s simply not the case.
While the average retirement age in 2024 was 62, according to a MassMutual survey, the average age of claiming Social Security is 65, according to AARP. That means many retired Americans have a three-year gap between leaving the workforce and getting their first benefit paycheck. Depending on your circumstances and financial plan, your gap could be even wider.
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If you’re in this situation, you need to be aware that this gap could actually make or break your whole retirement. Here’s why.
Facing the canyon between work and Social Security
Retiring before you start claiming Social Security creates a financial canyon: a period of time when you’re only relying on cash flows from your nest egg to meet living expenses.
Let’s take the example of Susan who is planning to retire at the age of 60 but wants to wait until she is 65 to claim Social Security benefits, which are estimated at $25,000 per year. Until then, her calculations suggest she’ll need $60,000 a year to live comfortably, which means withdrawing roughly 6% annually from her 401(k) that has a $1 million balance.
Given that her 401(k) is entirely invested in low-cost index funds that track the S&P 500 and the index has delivered an average annual growth rate of 10% since 1957, according to SmartAsset, Susan is feeling relatively confident about her strategy.
Unfortunately, Susan is unlucky to live through a severe bear market during her five-year gap. The S&P 500 dips 10% in each of the first two years and is flat for the remaining three. At the end of this painful period, Susan is left with just $527,400 in her 401(k) account before she even takes her first Social Security check.
That smaller balance means that her annual withdrawals now represent over 10% of her savings. At that pace, especially if markets stay sluggish or inflation pushes her costs higher, her 401(k) could be depleted years earlier than planned, leaving her with little more than Social Security to live on.
In other words, the gap between retirement and claiming Social Security can be a dangerous chasm. Without a plan to cross it, you risk watching your savings erode far faster than you expected.
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Building a bridge to protect your savings
One possible way to span that chasm is to build a financial “bridge:” a pool of safer, more stable assets you can draw from during the gap years. With neither employment income nor Social Security benefits flowing in, your personal finances are particularly vulnerable during these gap years. In Susan’s case, the biggest risk came from having her entire nest egg invested in volatile stocks during a market downturn.
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One way that Susan could have avoided this would be to earmark a part of her savings — say $300,000 of a $1 million portfolio — for safer, fixed-income investments like bonds that usually deliver a 5% annual return. Had she done this, her total nest egg would have shrunk to just $601,800 by the end of the five-year period (assuming the same abysmal stock market performance), roughly 14% higher.
Her financial bridge created a buffer that allowed her to keep more of her wealth intact.
This “bridge” strategy can mean having more wealth intact when Social Security payments begin, though it’s not without trade-offs. If the stock market outperforms expectations during those years, a more conservative mix could mean missing out on potential gains.
Still, for those who value stability and see their risk tolerance drop in the years between retiring and claiming Social Security, shifting part of a portfolio into bonds, Treasuries or other lower-volatility assets could provide peace of mind. As a rule of thumb, many financial advisers suggest a safer asset allocation mix as you get older, regardless of whether or not you’re facing such a gap.
Bridging the years between retiring and claiming Social Security isn’t just about covering expenses, it’s about protecting the savings you’ll need for the rest of your life. The stronger your bridge, the more securely you can cross into the next stage of retirement.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
