A bridge strategy uses retirement savings to create income during the years before Social Security begins. For example, someone may retire before claiming Social Security and use IRA or 401(k) withdrawals to cover living expenses for a few years. This can make it possible to delay Social Security, which may increase the future monthly benefit.
The idea sounds simple, but the execution matters. Taking too much from retirement accounts too quickly can reduce long-term savings. Taking too little may create cash flow stress. Using only traditional IRAs or 401(k)s may increase taxable income. At the same time, a mix of account types may offer more flexibility.
A bridge strategy should consider spending needs, tax brackets, investment risk, life expectancy, survivor needs, and the emotional comfort of drawing down savings before Social Security begins. For some retirees, the bridge may be valuable. For others, claiming sooner may be more appropriate.
To learn how a bridge strategy may fit into your retirement income plan, read the full article, “Coordinating Retirement Income: 401(k)s, IRAs, and Social Security,” where I explain how retirement accounts and Social Security can work together.