Q: I'm 65 and planning to retire this year. Would I be better off claiming Social Security now and withdrawing as little as possible from my retirement nest egg, or should I tap into savings and hold off on Social Security?

This is a pretty good position to be in, but there's no one-size-fits-all answer. There are solid arguments to be made for both options.

The argument in favor of claiming Social Security is that your retirement savings will be allowed to grow and compound on a tax-deferred basis for another few years.

It can also make better sense from a tax perspective. While Social Security income can be taxed, 85% of your benefit is the maximum amount that can be considered as taxable income, and for many people this percentage is significantly lower. Meanwhile, if you withdraw money from a tax-deferred retirement account like a 401(k), 100% of your withdrawal will be taxable.

The major downside to this option is that returns in retirement savings accounts generally aren't guaranteed, especially if you have a significant amount of stock-based investments.

On the other hand, claiming Social Security late gives you a guaranteed return. If you delay Social Security beyond your full retirement age, for example, your benefit will increase at a rate of 8% per year. Plus, keep in mind that Social Security is an inflation-protected income stream, while your retirement savings likely are not.

The bottom line is that both approaches have pros and cons. My preference is the delayed Social Security option, but it's important to consider your overall financial situation before deciding.

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