How to Decide When to Claim Benefits and When to Take Your Annuity
You’re past FRA, financially stable, and receiving severance pay for a year. You want to know whether delaying Social Security is worthwhile—especially since delaying increases your benefit by about $300 per month. You also have an annuity option that doesn’t grow much by waiting, so you’re considering taking it now.
This guide walks through every factor that matters so you can make the strongest long-term decision.
Should You Delay Social Security While Receiving Severance?
If your severance covers your needs, delaying Social Security is often the more intelligent choice. You lose nothing today and gain a larger guaranteed monthly benefit for life.
With a meaningful $300/month increase for waiting one year, your long-term financial security improves dramatically.
How Social Security Works Between FRA and Age 70
After reaching Full Retirement Age, your Social Security benefits are no longer reduced by earned income. Severance pay also does not count against you. This means you can file now without penalty.
But delaying still provides powerful advantages, as your benefit increases each year until age 70 through delayed retirement credits.
Why it’s unique:
- Few income sources allow you to permanently raise your lifetime payout simply by waiting.
Pros:
- Higher monthly income for life
- Larger survivor benefit
- No earnings test after FRA
Cons:
- Requires another income source temporarily
- No increases after age 70
Who needs this:
- Individuals with strong longevity expectations, stable finances, or a desire to protect a surviving spouse.
Who doesn’t:
- Those who need income immediately or prefer a front-loaded cash flow.
Why Waiting Matters: Rising Healthcare and Long-Term Care Costs
One of the biggest mistakes retirees make is focusing only on early retirement spending instead of preparing for the years when health declines, mobility slows, and medical expenses grow.
Healthcare costs rise faster than inflation, and long-term care costs rise even faster.
Why delaying Social Security can be essential:
- You lock in a larger lifelong income stream that continues even as medical expenses increase.
- The higher benefit can help cover Medicare premiums, deductibles, medications, and future care.
- If long-term care becomes necessary, a larger Social Security check reduces the pressure on savings.
- Your spouse also receives a higher survivor benefit, which is critical if they face healthcare needs after you’re gone.
Waiting to claim is not just about maximizing income—it’s about building resilience for the years when you slow down, and expenses rise the most.
How Your Annuity Fits Into the Strategy
Taking the annuity now usually makes sense because:
- You receive income immediately
- You don’t miss out on payments you can never make up.
- It helps bridge the gap until you file for Social Security.
Pros of taking the annuity now:
- Predictable cash flow
- Let’s you delay Social Security more comfortably.
- No benefit to waiting
Cons:
- Fixed payout (no inflation growth)
- Less flexibility if it requires annuitization
Who needs it:
- Those wanting a stable income now, while their Social Security grows.
Who doesn’t:
- Those preferring more control over assets or using GLWB-based products instead.
Related Insurance That Strengthens This Strategy
Delaying income works best when paired with protections that stabilize your financial plan:
- Life Insurance: Provides financial security for a spouse, especially since delaying Social Security raises their survivor benefit.
- Long-Term Care Insurance: Protects retirement savings against late-life care costs that can easily exceed $100,000/year.
- Medigap Coverage: Helps prevent unexpected medical bills from disrupting your income plan.
People aiming to reduce financial worry and ensure a predictable income throughout retirement benefit most from these options.
Final Recommendation
Your optimal plan usually looks like this:
- Delay Social Security for a larger lifelong benefit—especially helpful for future healthcare and long-term care needs.
- Start the annuity now since waiting adds little future value.
- Strengthen your plan with life insurance, long-term care insurance, and supplemental healthcare coverage so medical costs never destabilize your retirement income.
This approach provides stability today and protection for the years when you will rely on income the most.
Your Next Move
If you want personalized help deciding when to claim Social Security, reviewing annuity options, or comparing income solutions, contact The Annuity Expert for free quotes and guidance.
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Questions From Our Readers
- Does severance affect Social Security after Full Retirement Age? No. After the FRA, the earnings test ends, and severance does not reduce your benefit. Your only decision is whether delaying provides enough long-term value.
- Why is delaying Social Security so important for future healthcare needs? Healthcare and long-term care costs rise sharply later in life. A larger Social Security benefit provides a stable income source that keeps pace with rising expenses.
- Should I take an annuity now if it doesn’t grow by waiting? Usually yes. If the payout doesn’t increase, delaying only means losing income you can’t recover.
- What protection should I consider to stabilize retirement income? Life insurance, long-term care insurance, and Medigap help protect your income from healthcare shocks and ensure your spouse remains financially secure.