The Social Security Question Most Washington State Public Employees Are Getting Wrong

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

I’ve noticed a pattern with the clients I work with.

When the Social Security question comes up, most people have already made up their mind before we even start talking. They’ve heard the advice. Wait until 70. Get the biggest check possible. End of story.

And honestly, the math behind that advice is real. Claim at 62 and your benefit gets reduced. Wait until 70 and it can be roughly 77% higher than if you had claimed at 62.1 That’s not nothing.

But here’s what I’ve started to notice. That number, the size of the monthly check, is only one piece of the puzzle. And for a lot of Washington State public employees, it may not even be the most important piece.

The question most people aren’t askingLet me walk through a hypothetical that captures what I’ve seen in practice.

Imagine someone like Karen. She’s 62, wrapping up a 28-year career as a budget analyst with a state agency, and she’s enrolled in PERS 2. Her pension is going to replace a meaningful portion of her income, but she’s also built up a solid DCP account (the 457(b) plan available to many Washington public employees2).

She’s been told to wait until 70 for Social Security. And on the surface, that sounds right.

But when we sit down and actually look at her full picture, a different question starts to matter more. Not “which age gives me the biggest check?” but “which claiming age gives me the best after-tax outcome for my entire retirement?”
Those are not the same questions.

Where the math gets more interestingHere’s the part most people don’t think about.

Every dollar Karen pulls from her DCP or traditional IRA is taxed as ordinary income at the federal level.3 If she’s not drawing Social Security yet, she’s relying entirely on those accounts to fund her life in the early years of retirement. That’s fine, but those are fully taxable dollars going out the door every month.

Social Security is taxed differently. Up to 85% of the benefit may be subject to federal income tax, depending on total income.4 But a minimum of 15% is always federally tax-free, regardless of how much other income you have.4

That’s a real difference. The same dollar of living expenses, funded from Social Security instead of her DCP, carries a lower federal tax cost. And over several years of early retirement, that adds up.
 
The Roth conversion windowThis is the part of the conversation that most people miss entirely.

Karen has a window of time between when she retires and when required minimum distributions kick in around age 73.5 That window is valuable. It’s a chance to convert pre-tax money from her DCP or IRA into a Roth account, paying tax now at a potentially lower rate, so future withdrawals are tax-free.5

But here’s the challenge. Every dollar she pulls from her DCP for living expenses takes up tax bracket space. And every dollar she wants to convert to Roth also takes up that same space. They’re competing.

If Karen takes Social Security at 62, even at the reduced amount, she needs less from her DCP each year to cover her expenses. That frees up room in her bracket. And that room can go toward Roth conversions instead.

The goal isn’t to convert as much as possible as fast as possible. The goal is to convert strategically, filling each tax bracket thoughtfully over several years. That means knowing in advance where the guardrails are.

As conversion amounts increase, total income rises with them. That can push into Medicare’s IRMAA thresholds, which trigger higher Part B and Part D premiums.6 Those thresholds change annually, so this is something to model each year, not just once. A good plan accounts for this from the start and builds around it rather than getting caught off guard.
Social Security, when timed as part of this broader picture, doesn’t compete with Roth conversions. It actually creates more room to do them well.

A pension changes the whole pictureHere’s something I think about a lot folks who have a pension.

Karen’s pension is already going to provide a base of income in retirement. It’s not optional, it’s not market-dependent, it just shows up every month.2 That changes what she needs her portfolio to do.

She doesn’t need her DCP and IRA to replace her entire paycheck. The pension handles the foundation. That means the DCP has a different job: flexibility, tax management, and long-term growth.

When someone has a pension as their income floor, the case for draining that account aggressively in early retirement just to delay Social Security gets weaker. The math changes.

So when does waiting until 70 still make sense?It does sometimes. I want to be honest about that.

If Karen has serious reasons to expect a long life, or if she’s the higher-earning spouse and survivor benefit planning is a priority, waiting can absolutely be the right call. The break-even analysis is legitimate. It usually works out somewhere in the early 80s/late 70s, meaning if she lives past that point, the larger check tends to win mathematically.1

But those calculations assume static years with no taxes, no cash flow considerations, and no effect on the rest of the plan. That’s not how retirement actually works.

What I’d suggest insteadRun the actual projections for your specific situation. Not a general rule, not a calculator that only looks at one number. A real analysis that accounts for your pension income, your DCP balance, your Roth conversion goals, and what taxes are going to look like across the next 10 to 15 years.

The answer for Karen might be 62. It might be 65. It might still be 70.

But whatever the answer is, it should come from her specific numbers. Not from a default.

Social Security timing is one of those decisions that quietly connects to everything else in retirement: your tax brackets, your Roth conversions, your future RMDs, your Medicare premiums. It all flows together.
Getting it right is worth the time to actually look at it.

​Sources1. Social Security Administration. "Retirement Benefits: When to Start Receiving Retirement Benefits." https://www.ssa.gov/pubs/EN-05-10147.pdf
2. Washington State Department of Retirement Systems. "Deferred Compensation Program." https://www.drs.wa.gov/plan/dcp/
3. Internal Revenue Service. "Publication 590-B: Distributions from Individual Retirement Arrangements." https://www.irs.gov/publications/p590b
4. Social Security Administration. "Income Taxes and Your Social Security Benefit." https://www.ssa.gov/planners/taxes.html
5. Internal Revenue Service. "Retirement Topics: Required Minimum Distributions." https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
6. Centers for Medicare and Medicaid Services. "Medicare Costs." https://www.medicare.gov/basics/costs/medicare-costs