My partner and I have $1.5M in savings, no debt and we’re near full retirement age. We’re considering retiring and claiming Social Security. Do we have enough to retire comfortably?

You’ve done some quick calculations: together you have no debt, average health, annual expenses that total $47,000 and a combined Social Security benefit that would provide you with $48,000 annually.

On paper, it looks like you and your spouse are doing quite well, but in order to assess whether you two are ready to retire, let’s get into the numbers.

Full retirement age and Social Security benefits

Full retirement age (FRA) is the age when you can collect your full Social Security benefit — for anyone born in 1960 or later, FRA is 67. Americans can start collecting Social Security benefits as early as 62, but anyone who does so will see a reduction in the size of their benefit checks.

To avoid a reduction, American seniors are encouraged to delay collecting Social Security until FRA at 67, but there are advantages to delaying your claim even further. Social Security benefits increase by a certain percentage for every month that you delay your claim past FRA — however, the monthly increases stop when you reach age 70. To max out their benefits, Americans are encouraged to delay their Social Security claim until 70.

Since you and your spouse are nearing full retirement age, the two of you won’t have to wait long to claim your full benefits — which, as you’ve already calculated, would give you $48K per year. With annual expenses totaling $47K, your benefits would barely be able to cover your living costs, but that could change.

Due to inflation, your expenses are likely to go up in the coming years, and while Social Security benefits have built-in Cost of Living Adjustments (COLA) that result in periodic increases, these increases are struggling to keep seniors from losing ground. In fact, the Senior Citizens League estimates that benefits have lost around 20% of their buying power since 2010.

But the good news is that you and your partner won’t have to rely solely on Social Security in retirement. With $1.5M in savings, the two of you could settle on a safe withdrawal rate of, say, 3.7% — which would give you an additional $55,500 per year. Coupled with the $48K you’d receive in Social Security benefits, that’s an annual income of roughly $103,500.

That’s much more than you would need to cover your $47K in annual expenses. In fact, with so much extra annual income, you and your partner may even consider a more conservative safe withdrawal rate of 2% — which would give you $30,000 per year from your savings.

Add that to your $48K in benefits and you’d have roughly $78K in annual income. That’s more than enough to handle your annual expenses, and a lower safe withdrawal rate will help you stretch your savings even further.

Delaying your Social Security claim

With $1.5M in savings, you and your partner are in such a good spot that you may want to consider delaying your Social Security claim past FRA.

As mentioned earlier, you can earn delayed retirement credits if you hold off on claiming Social Security — these credits can be earned until age 70 and represent an 8% increase per year. Since you are on track to earn $48K in Social Security benefits at FRA, a 24% increase would give you and your partner an extra $11,520 per year, giving you roughly $59,520 in annual Social Security Income (SSI).

That’s a significant increase in your benefit checks, and you and your partner would only have to delay your Social Security claim by a few years in order to get it. However, this would mean that you’d have to rely solely on your retirement savings until you reach 70 years old.

If you were to hold off on claiming benefits and settle on a safe withdrawal rate of 3.7% for the first few years of retirement, that would give you $55,500 of income per year, which would be enough to cover the $47K that make up your annual expenses.

As mentioned earlier, deciding when to begin claiming Social Security benefits is a tricky decision, but you and your partner have options that you can explore. You’d just have to figure out if maxing out your Social Security benefit is important to you, and if your savings can keep you afloat until you reach age 70.

Supplementing your Social Security income

Delaying Social Security benefits until age 70 isn’t always an option for everyone. And since you and your partner seem to be set on retiring soon and claiming your benefits right away, it may not be an option for you, either.