Social Security Optimization for HNW Retirees (2026 Update)
Episode 12
Social Security Optimization for HNW Retirees (2026 Update)
Published on November 5th, 2025
Episode 12 of Retirement Tax Matters focuses on Social Security optimization for Hign-Net-Worth retirees, framing it as a critical spousal protection and legacy tool rather than a simple break-even calculation. We explain why the higher-earning spouse delaying their benefit to age 70 is often the most critical decision, as it maximizes the guaranteed, inflation-adjusted survivor benefit for their partner. We then cover the key 2026 updates, including the 2.8% Cost of Living Adjustment (COLA) and the new maximum monthly benefit of $4,152 for a worker filing at Full Retirement Age. We also discuss how the Social Security payroll tax wage base has increased to $184,500. Finally, we connect this high-benefit strategy to your long-term tax plan, discussing how this large, guaranteed income stream interacts with RMDs and can contribute to the surviving spouse tax shock making proactive planning essential.
Key Tax Planning Questions
Click Below To See The Answer
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For high-net-worth (HNW) retiree married couples, Social Security is often one of the best, if not the best, retirement assets you own, even if it’s not the largest. It deserves to be optimized, especially since you've paid significantly into the system over your career.
Social Security provides a two-feature combination that is difficult to replicate in the private market. First, it has an uncapped, annual Cost-of-Living Adjustment (COLA). As we’ve seen in recent years, a high-inflation environment makes this feature incredibly valuable. Second, and most importantly for married couples, it has a powerful survivor benefit: the higher of the two spouse's benefits lives on for as long as the surviving spouse lives.
This inflation-protected survivor benefit is the key. Delaying the higher-earning benefit (often to age 70) is less about a break-even for that individual and more about permanently maximizing this inflation-protected, guaranteed income stream for the surviving spouse, who may live for decades longer.
While taking Social Security early to fund a specific lifestyle goal is a valid discussion, taking it early simply to reinvest it is often a flawed strategy. It reduces the decision to a simple ROI calculation, ignoring the invaluable insurance components (longevity and inflation protection) and unnecessarily exposing you to market risk when you don't need to.
For most HNW retirees, the optimal strategy is often for the higher earner to delay claiming until age 70, using other portfolio assets (from a brokerage account or IRA) as a bridge to cover income needs. This not only maximizes the survivor benefit but also creates the Golden Window—several years of lower income perfect for executing strategic Roth conversions.
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This is a feeling I've heard expressed by some clients. They understand it's not a "problem" in the traditional sense and can feel hesitant to even say it, but they are in a position where the additional income from delaying Social Security just doesn't move the needle.
They are concerned about the pressure to optimize every financial decision around paying less tax and having MORE money than they already need. Perhaps when you mix in the news about Social Security's future funding, this type of person can get to the point of, "Let's just take it now and get what I can out of the program."
I understand the sentiment — I've sat across the table from many retirees who have more than enough, and they often struggle with the tension of being prudent stewards of their assets while also dealing with the complexity that wealth brings. Many are navigating the blurry area between leaving enough for their beneficiaries and leaving too much.
Here’s what I would say to this person: First, a reminder that if they are married, Social Security still might be one of their best financial assets, even if it’s small by comparison. Perhaps we can use this Social Security discussion—and the feelings of excess and responsibility it brings up—as a springboard to a larger conversation about their charitable and estate planning intentions.
Maybe it still does make sense for the higher-earning spouse to delay their benefit until 70, specifically because of the powerful, inflation-adjusted survivor benefit. But perhaps the solution to the excess income problem this creates is to accelerate your giving goals.
This could be a reminder that they might live the exact same life with HALF the money they have now. It might mean helping children or grandchildren now instead of in 20+ years, even if there are no tax benefits for doing it (like paying the tax on appreciated stock now, knowing the family member benefits more from it today than from a step-up in basis at your death).
Social Security can be a charged subject that brings our beliefs about money to the surface. But for many HNW retirees, the general principle of delaying the higher benefit makes sense, even for those with more than enough, precisely because of that valuable survivor benefit.
The real planning opportunity it creates, however, may not be about Social Security at all, but about what they choose to do with the rest of their wealth as a result.
Full Episode Transcript
Adam: Good morning and welcome to Retirement Tax Matters. I'm Adam Reed, and this is Garrett Crawford, our CFP on staff here. We're coming to you again this morning with another episode, and I think this is the most exciting episode, right?
Garrett: The most exciting episode!
Adam: It's always so funny. I think it's like any topic: there are things we nerd out about and like because this is our industry—it's what we do for a living. Like any hobby, sport, or theater, you get into these little niche things that for some people are really exciting, and some people are like, "Are you serious? You care about that? You enjoy that?" I think this one is actually pretty cool and pretty impactful.
Garrett: Yeah, I think, to break the tension on this excitement, we're going to be talking about Social Security. I agree. This is a near and dear topic to me because it was how I got my start in this industry. I got hired, and Paul, who I've worked with for a lot of years, said, "I need you to learn everything you can about Social Security." I said, "I didn't know a lot, but sure." I started reading book after book, and I do kind of nerd out on this. I love the annual updates in October.
Adam: It is funny too. For a lot of Americans, it's all of their retirement, so they're depending on it. It's very important for most, I'd say almost all, Americans. It's a big piece of the puzzle. We talk about it being kind of the foundation of your retirement. For some people, it's all their retirement, but for almost everybody, it's a foundational piece. It's interesting, though, where with retirement assets, we can adjust year by year how much we're spending, how much we're saving. Social Security is the one thing that once you set it, you're kind of stuck with what you get. You have to make good decisions on the front end.
Garrett: Yeah, it's a kind of irrevocable, once-in-a-lifetime decision—with an asterisk. You actually do have one "mulligan" that I tell people about: if you sign up and you've been on it less than a year, you get that mulligan. But if it's been longer than a year, yes, it's a once-in-a-lifetime decision. So it is a pretty big decision.
Adam: I thought we'd kick off today with maybe just touching base on some changes coming up for 2026. Not a whole lot of crazy differences. The one "Big Beautiful Bill Act" had a lot of different things going on, but Social Security hasn't been affected all that much. We can check out the enhanced senior deduction—I think we've got a video about it if you want to learn more about that. But tell me, what's updated, what's changed from 2025 heading into 2026?
Garrett: Okay, so every October, usually it's October 15th, but this year we were struggling through the government shutdown. I guess we're still going through the government shutdown, but parts are working and other parts aren't.
Adam: If anyone's got a friend with a political podcast that covers all these things, link me. I don't understand what's shut down, what's not. I hear this program is... yeah, this isn't a political podcast, so we'll drop it there, but I have no idea what a government shutdown really means.
Garrett: There's some mystery, but usually it's October 15th, and like a nerd, I have that circled on my calendar because I think it's "Christmas at the Crawford House." I find it very interesting to know what the updated COLA amount is going to be, the working limits, all that. It's funny, I was at a workshop last week, and I said, "They've actually delayed the Cost of Living Adjustment announcements because of the government shutdown." I'd read a little bit about it, and then one of the attendees said, "No, actually, it's coming up tomorrow." I said, "Sure, great." And sure enough, the very next day they announced it, so that person was on it. Again, I'm not sure why it got delayed, but then it came out late. I'm sure everybody out there listening probably was not waiting on that announcement like I was. Every year for people that are on Social Security, this is a big deal because it helps them know how much their Social Security benefit is going to go up the following year. It's like a little bit of an annual raise for people who are on Social Security. They call it the COLA—it's not a soda—it stands for Cost of Living Adjustment. One of the great things about Social Security is that it's supposed to keep up with inflation each year through your retirement. Quick little side story: When I first started doing this in 2013, I had this chart, and sometimes I'd be doing a Social Security workshop, going through the history of the COLAs and talking about this inflation adjustment. This was 2013, and the room would laugh and be like, "Oh, what inflation adjustment? We aren't getting anything!" We had just come out of like two years of no inflation, so the Cost of Living Adjustment can be (and sometimes is) 0%. I remember either the second or third year, maybe after doing two years in a row of no Cost of Living Adjustment, it was like 2014 or maybe 2015, there was a 0.2% Cost of Living Adjustment. I think during the time I was helping people, that was almost like more salt in the wounds: "They're gonna give us 0.2%? Does that actually do anything?" There's another topic we'll talk about one day—a little-known rule that came up during those years called the "hold harmless rule," which I don't think we're in danger of encroaching this year. Anyway, long story short, people that are on Social Security look forward to this October number with the updated amount just so they know how much money is going to be rolling in next year. I would bet a lot of people that are on Social Security already know what that number is; they've probably been inundated with emails and wherever else you get your news. But starting in 2026, the new number is your Social Security benefits will go up 2.8%. Every year Social Security releases this fact sheet. This is actually my first time today looking at the new fact sheet, but it's got all the numbers. The main one is the Cost of Living Adjustment. The other one, for people that are still working, will tell you how much you can earn at work before Social Security will start withholding paychecks—I'm not going to go into that one today. There's another number that if you're still working—I call it the payroll tax—the amount of income that you have to pay a 6.2% Social Security payroll tax on. When I first started, I think it was in the $120k to $130k salary range. Starting in 2026, you have to pay that Social Security payroll tax on earnings up to $184,500. If you make above that, you get a little relief from the Social Security tax. The last number I'll share here—we're going to dive into more kind of advanced tax planning topics—is the maximum Social Security benefit. A lot of people are always curious about that number. When somebody turns Full Retirement Age in 2026, if you've been a maximum income worker for years and years, the most you could get out of Social Security is $4,152 per month at Full Retirement Age. You can check your statement and see how close you are to the Full Retirement Age maximum benefit.
Adam: Nice. I'm expecting next time we come over for dinner, that'll be on the mantle framed and right in the middle of the house.
Garrett: I have a pocket-size version in my back pocket that I pull out just to reference, just in case.
Adam: Exactly. I think, in light of that, talking more about tax planning, for people that are looking forward to Social Security—probably a lot of people listening, a lot of our clients, have already filed for Social Security and are receiving benefits. But for those that are still thinking about it, maybe those that have already filed but just like to learn about this stuff, I've heard you say that one of the most important decisions you make, or one of the most important things to think about when you're filing, is actually the survivor benefit. Can you give some more information and clarity on that?
Garrett: This podcast is for high-net-worth retirees. We're thinking somewhere between maybe $2 million and $8 million net worth, and a lot of the advice we give here is going to be tailored for that. But I think this is one that crosses thresholds, no matter where you're at, as long as you're married. I think one of the most undertalked about benefits of Social Security is the way the survivor benefit works. If you're married, you're probably not going to have the exact same Social Security benefits. In a married couple, one usually has a higher benefit—they've worked more—and one has a lower benefit. It's important to know what benefits are going to remain after one of you dies. The way Social Security works is that the higher benefit lives on; the lower benefit goes away. So if I'm talking to a married couple, this is not Social Security jargon, but I think it's helpful in the way you frame it: I call the higher benefit the guaranteed benefit. I say guaranteed because we know that higher benefit is going to be around for whoever lives longer. The smaller benefit is going to disappear at the first spouse's passing. You can imagine Social Security can, in some ways, act a little bit like insurance. Sometimes people want to think of it just as an ROI and an investment: "I've got to live—they call it the break-even analysis—I've got to live until 87 before I break even on Social Security." I understand why people do that, but if you're not married, that's one way to think about it. If you are married, it's not that simple. I say that because let's say you take Social Security early because you're convinced you have to live a long time to make up the difference. If you take it, let's say, at 64, sometime after 62, your benefit is smaller. You feel like you're going to come out ahead, and let's say your benefit is $3,000 a month, somewhere around there. You're going to receive $3,000 a month. But if you die unexpectedly or die sooner than you anticipate, the difference between having $3,000 a month for your spouse for the rest of their life versus $5,000 or more if you had waited until after Full Retirement Age, is a huge difference. We're talking about a couple of thousand dollars a month that could be around for a surviving spouse that didn't get calculated into that break-even analysis. I would just say for people who are typically married, the rule of thumb here is: if the person that has the higher benefit, especially if they are male and older, has the higher benefit, you should really consider delaying that Social Security, especially for the target person listening to this podcast who may have a higher net worth or other assets. You probably have other income sources that you could live on to help delay that Social Security because, zooming back out, Social Security is one of the best retirement assets you have because: It's going to last as long as you or your spouse lives, so it takes care of longevity risk. It keeps up with inflation. We're all freshly aware of what kind of damage that can cause. This one's debatable—we're going to hit it at the end—but I would consider the peace of mind of Social Security that you know that income is going to come in month after month, and it's backed by the Federal United States. That's a good thing. Three powerful features. The survivor benefit is important. Social Security is one of your best assets in retirement.
Adam: I think that nails the planning side of things, thinking through not just the break-even, but also what you're getting out and the benefit of having the extra. I think in light of that, on the tax planning side of things, we did an episode a few weeks back about the surviving spouse tax shock—once you go from married filing jointly and kind of in a rhythm, and you know what your income is going to be, your spouse passes away. Well, now you've kept the bigger benefit, and your tax bracket has also dramatically dropped. How do you think about that? Is that something you planned for? Are there ways to work around it? What are your thoughts on the surviving spouse having that bigger benefit and trying to navigate tax planning around that?
Garrett: I would zoom back out a little bit. The Cost of Living Adjustment is kind of fun to talk about—you get a raise, you get more income. I would say for most people, no matter where you are income-wise, it is interesting and probably very helpful, but it's also not the most important thing. Anytime we're talking about making good financial planning decisions, we have to zoom back out and figure out what our goals are. If we don't know our goals, we're kind of blindly walking year to year, not knowing what we're doing. I think the survivor benefit is important because it helps protect the spouse, ensuring they have enough income, and it's going to increase with inflation each year. However, there can be a tax challenge. Let's say you waited for Social Security until age 70, and you're one of these maximum income workers. Your $4,100 grows by another 24%, and you're over $5,000. That's a wonderful protection for a spouse that could live a long time. But let's just say that benefit amount is $5,000 a month to keep it simple. If you die, the spouse is going to lose the smaller benefit but retain the higher $5,000 a month benefit—that's $60,000 a year. If there's any other type of Required Minimum Distribution (RMD) income on top of that—maybe you have a big IRA, we talked about how quick you can hit a six-figure RMD from withdrawing—those income sources (Social Security, maybe a pension that's going to a spouse, maybe an annuity that's going to a spouse) can accumulate. While you might have been in a 24% tax bracket while you were both alive, a surviving spouse could go up to a 32% tax bracket as an individual. It might sometimes be a difference between a 22% and a 24% bracket, which isn't as big. Still, a bigger survivor benefit does create a tax planning issue that you want to be aware of—specifically, what tax bracket a spouse would be in if you passed.
Adam: That sounds good. I appreciate you guys joining in with us today. Check us out. We're on Spotify, Apple Podcast, and here on YouTube, if that's what you're listening on. Check out the website, retirementtaxmatters.com. I don't think I've plugged our free resource on there in a while: the Six-Point Checklist for High Net Worth Retirees, kind of gearing up for retirement. We think it's a great resource, a great thing to check out, even if you're in retirement and think, "Man, I wonder if I missed something." It's not the end of the world; you can go back and check it out and look at it. We appreciate you guys listening in. It's always a blast to sit down and talk taxes and Social Security and all that fun stuff. We're here every Wednesday, so we appreciate you all listening. Hope you have a good rest of your day. My name's Adam Reed; this is Garrett Crawford. See you all later.