Why bridging the gap matters

Many Americans face a multi‑year income gap between when they need retirement income and when Social Security benefits begin or reach a level they can rely on. Social Security can be claimed as early as age 62, but full retirement age (FRA) and the benefits you receive depend on your birth year and the age you choose to claim (Social Security Administration — https://www.ssa.gov). Delaying benefits past your FRA increases your monthly check up to age 70 (SSA). That makes effective bridge planning important: a well‑designed short‑term income plan can let you postpone Social Security, increase long‑term lifetime income, and reduce the risk of running out of money.

This guide covers practical, tax‑aware options you can use to bridge the years before you reach Social Security eligibility or to delay claiming until a more advantageous age. It draws on common client scenarios and best practices used by advisers in 2025.

Core bridge strategies (and when to use them)

  • Savings drawdown (tax‑aware): Use a short‑term “bucket” strategy. Fund 12–36 months of living expenses in cash or very short‑term bonds to avoid forced withdrawals during market downturns. For longer gaps, sequence withdrawals from taxable brokerage accounts first, then tax‑deferred accounts (IRAs/401(k)s), and finally Roth accounts, while considering tax brackets and RMD timing (IRS — Publication 590‑B and related guidance on distributions — https://www.irs.gov).

  • Part‑time or contract work: Generates cash, maintains skills, and can be flexible. If you claim Social Security before full retirement age and continue to work, earnings above the SSA’s annual exempt amount may temporarily reduce your benefit (Social Security Administration — https://www.ssa.gov). Factor work income into your tax plan and benefit timing.

  • Annuities and QLACs: Immediate or deferred annuities can convert a lump sum into predictable income. Qualified Longevity Annuity Contracts (QLACs) sit inside retirement accounts and start payments at a later age (commonly 80–85) to reduce longevity risk and delay required minimum distributions. Annuities have costs and complexity; compare surrender charges, fees, insurer strength, and payout guarantees (CFPB — consumer guidance on annuities — https://www.consumerfinance.gov).

  • Home equity: Selling, downsizing, or using a reverse mortgage can provide cash flow for homeowners aged 62+, but these options have tradeoffs and eligibility rules (see our piece on reverse annuity mortgages: What is a Reverse Annuity Mortgage (RAM)? — https://finhelp.io/glossary/what-is-a-reverse-annuity-mortgage-ram/).

  • Healthcare planning: If you retire before 65, plan for health coverage: employer continuation (COBRA), the ACA marketplace, or Medicaid if eligible. Medicare generally begins at 65; failing to secure coverage can be costly (Medicare.gov; HealthCare.gov).

  • Short‑term loans or bridge credit (cautious): In some circumstances, a low‑cost bridge loan or a home equity line of credit (HELOC) can be preferable to liquidating long‑term investments in a down market — but treat debt as a measured, last‑resort tool.

Tax and retirement‑account considerations

Tax rules shape the order and cost of withdrawals:

  • Taxable accounts: Selling appreciated investments first may produce capital gains taxed at lower rates (long‑term vs short‑term) depending on holding period (IRS — https://www.irs.gov).
  • Tax‑deferred accounts (IRAs/401(k)s): Withdrawals are taxed as ordinary income. Large early withdrawals can push you into higher tax brackets and increase Medicare Part B/D premiums later (IRMAA) (IRS; SSA).
  • Roth IRAs: Qualified distributions are tax‑free. Consider converting portions of tax‑deferred assets to Roths in low‑income years to lessen future tax drag, but be mindful of the immediate tax hit of conversions (IRS Publication 590‑A).
  • QLACs and Required Minimum Distributions (RMDs): A properly structured QLAC can reduce RMD exposure in early retirement by delaying part of the RMD base to later years (see our QLAC glossary: Qualified Longevity Annuity Contract (QLAC) — https://finhelp.io/glossary/qualified-longevity-annuity-contract-qlac/).

Always model withdrawals with after‑tax results; small differences in timing can materially change lifetime income.

How to choose among options — practical decision framework

  1. Define the gap: How many years until you plan to claim Social Security? When do you expect Medicare to begin? What’s the size of your emergency fund?
  2. Map guaranteed needs: Identify fixed costs (mortgage, insurance, minimum debt payments) that must be covered.
  3. Prioritize low‑cost, liquid sources for near‑term needs (cash buckets, short‑term bonds).
  4. Consider earned income: part‑time work can reduce withdrawals and preserve portfolio growth.
  5. Evaluate lifetime‑income products (annuities, QLACs) only after comparing fees, insurer ratings, surrender periods and alternative sources of lifetime income (pensions, spousal benefits). For annuity basics see our Annuity glossary entry: Annuity — https://finhelp.io/glossary/annuity/.
  6. Stress test the plan: Model market drops, health shocks, and longevity scenarios.

Real‑world examples (scenario summaries)

  • Scenario A — The Delaying Earner: Sarah is 62, has a modest brokerage account and a full‑time offer she can accept part‑time. By working part‑time for two years and drawing a small portion from taxable accounts, she delays claiming Social Security to 66, resulting in a higher monthly benefit later.
  • Scenario B — The Lump‑Sum Purchaser: Mike has a lump sum from a pension buyout and is uncomfortable relying on market returns. He buys a small immediate annuity to cover rent and medical premiums while leaving the remainder invested for growth.
  • Scenario C — The Health‑First Planner: Ana retires at 63 and lacks employer health insurance. She uses COBRA/marketplace subsidies for health coverage for two years, draws from a cash bucket, and does Roth conversions in a low taxable year to smooth future income tax.

These are simplified examples. Small differences — tax filing status, state taxes, spousal benefits, and expected retiree pay dates — change which option is best.

Costs, risks and common pitfalls

  • Sequence‑of‑returns risk: Selling investments after a big market drop can lock in losses. Maintain a liquidity buffer.
  • Annuity complexity: Fees, illiquidity, and poor insurer credit ratings can make annuities costly. Compare products, read prospectuses, and use independent ratings (AM Best, S&P) and reviews (CFPB).
  • Under‑insuring health care: Missing the transition to Medicare or not budgeting for premiums and gaps can erode savings quickly.
  • Too‑aggressive Roth conversions: Converting too much in a single tax year can push you into a higher bracket and increase Medicare IRMAA later.

Professional tips and tactical moves

  • Build a multi‑bucket cash strategy: 12–36 months of short‑term liquidity for near needs, a 3–10 year conservative bond ladder, and a growth bucket for long‑term needs.
  • Use earned income to your advantage: Flexible consulting can cover living costs and preserve retirement assets — and may let you delay Social Security for a larger future benefit.
  • Consider partial annuitization or annuity laddering instead of a full annuity purchase to balance liquidity and lifetime income (see When to Buy an Annuity — https://finhelp.io/glossary/when-to-buy-an-annuity-questions-to-ask-before-you-commit/).
  • Coordinate Social Security timing with spousal or survivor benefits: For married couples, claiming strategies interact; delaying one spouse can boost survivor benefits for the other (SSA).
  • Review health coverage transitions early: If retiring before 65, compare COBRA, ACA subsidy eligibility, and Medicaid rules in your state (HealthCare.gov; Medicare.gov).

Frequently asked questions (brief)

  • Will working before claiming Social Security reduce my benefit? Possibly. If you claim before FRA and earn more than the SSA’s annual exempt amount, benefits may be temporarily withheld. The SSA publishes yearly thresholds and calculators (Social Security Administration — https://www.ssa.gov).
  • Can I convert retirement savings to an annuity and still delay Social Security? Yes. Buying an annuity doesn’t prevent you from delaying Social Security, but you should model taxes, Medicaid eligibility, and the annuity’s terms first.
  • How do I avoid paying too much tax when withdrawing retirement funds? Prioritize withdrawals from taxable accounts, then tax‑deferred, and use Roth conversions strategically in low‑income years. Consult a tax professional (IRS guidance and a CPA recommended).

Checklist before you act

  • Run a cash‑flow projection to confirm the size and timing of the income gap.
  • Identify guaranteed expense coverage (housing, insurance, minimum debts).
  • Get quotes and illustrations for annuities from multiple issuers and compare costs.
  • Confirm health insurance options and premium costs until Medicare eligibility.
  • Talk with a tax advisor about potential Roth conversions and the immediate tax impact.

Where to learn more

Professional disclaimer: This article is educational and does not constitute personalized financial, tax or legal advice. For decisions about your retirement income plan, speak with a qualified financial advisor and tax professional who can model outcomes for your situation.

Authored by a financial content editor with experience editing retirement planning material and advising on transitional income strategies. Sources: Social Security Administration (ssa.gov), Medicare.gov, HealthCare.gov, IRS publications on retirement accounts, and Consumer Financial Protection Bureau consumer guidance.