The Social Security Dilemma: Take it Now, Or Wait?

Should we take our Social Security benefits at “Full Retirement Age” (FRA), or wait?  The Social Security Administration (SSA) will add 8% every year from your FRA to age 70.

We present an option, for those who qualify, to enhance later income, create consistent growth of asset(s), and add risk management through the use of Whole Life insurance.  The insurance provides growth guarantees and liquidity of “living benefits”, funded by those Social Security payments.  There is also the opportunity to include Long-Term Care in the design.

I was speaking with a colleague who was trying to make a decision on taking his Social Security income in March, when he reached his FRA.  He was very uncomfortable with the state of affairs in Washington, but did not need the money immediately.

Regarding Social Security: Some of us believe it’s increasingly under-funded and in trouble.  Some of us believe it will survive the political rhetoric and pressures we hear about.  Either way, as we are employed and earning, we pay into the system in order to collect an income later in life.

If there was a way to create your own private retirement program utilizing Social Security funding (at least partially), would you be interested?  Would it be better if we added features and options?

It would be nice to create a reliable replacement, wouldn’t it?  We can’t do that since law requires contribution to the plan through employment.  Partial is the best we can do.  The concept of even that, “partial”, is comforting to me; I’m not a fan of “privatizing” Social Security, and I hear that noise from political circles frequently enough to make me queasy.

For many Baby Boomers, the choice of when to take Social Security income is a current challenge.  The decision is typically based on 1) need, or 2) life expectancy. 

Here we present a case study of a man born on February 4th, 1951…66 years old in early 2017.    (In the case of those born between 1943 – 1954, FRA is 66).

Based on his income history, the SSA will provide a monthly income of ~$2500 if this man chooses to elect receipt of income “now”, at his FRA; this is ~$30,000 per year for life.

If he waits one year, to age 67, the monthly income would grow to ~$2500 + 8% = ~$2700, or ~$32,400 per year. Waiting to age 68 would provide another $200, to ~$2900, or ~$34,800/yr., to age 69 would be ~$37,200, and finally, to age 70, ~$39,600.

Again, if income starts at age 66, that income would be ~$30,000 per year, and at age 70, ~$39,600; a difference of $9,600.

Here is the option he chose:

Our man will purchase Whole Life insurance (from a mutual company) with the ~$2500 monthly income. This is ~$30,000 per year for each of 10 years (a “10-pay” policy). After 10 years, the $30,000 will still be paid by the SSA, but he will have that income free of any premium requirement. He is including a Long-Term Care rider in the policy at a (built-in) nominal cost.

This is only one company, and the results will certainly vary from one company to another. Additionally, not everyone will qualify for a policy possibly due to health concerns.  We are rounding figures for ease of explanation.

The policy structure is designed for 10 premiums (“10-pay”), and at “standard” health rating; projections show the following benefits: 

                                                       @ one year                @ 10 years              @ age 90

Cash Value (CV)                         $10,219                       $276,767                 $533,114

Death Benefit (DB)                    $324,007                    $393,057                $612,987

Long-Term Care rider (LTC)   $6075 benefit/mo. for 48mo. (to start)*

Of course, these numbers can vary, and be impacted by “use”.

* Premium for LTC, for 10 years, is $65.63/month (built-in), with the possibility for an increase to $131.26 only during that 10-year period.

Now, income (from the policy) starting in the 11th year (and running to age 101) is projected to be ~$18,000/yr.

In summary:

Social Security income is directed to a “non-direct recognition” Whole Life policy for 10 years.  There are guarantees in the policy regarding CV and DB, with the CV guaranteed to grow for the life of the policy. There is flexibility in any use of that CV.  We do not use any form of Universal Life (UL); that would add risk to policy-growth results.

The policy can provide additional income (~$18,000/yr) from age 77 to age 100, at current numbers.

The policy can be used for LTC from day one.

The policy will have a DB, and can be used in the traditional approach to estate planning, legacy, and/or protecting a beneficiary. This DB is a feature not found in the SSA program.  Yes, there is a hand-off to a surviving spouse, but only that.

What if the policy’s insured dies within the first 10 years and leaves a spouse? Social Security would no longer be directed to the policy’s premiums, but the Social Security will continue to the spouse (assuming the deceased was the “breadwinner”)!  The policy would pay the DB to be used as necessary.

We have added flexibility, possible income, protection, and options.  If you can afford to wait on the SS income, doesn’t this make sense?

About L N Himel

Site creator and author has well over 30 years experience in the world of Finance at both the institutional and personal levels. As is often true, his successes, but also the pain of the author's mistakes, have resulted in insights that you, the reader, might find helpful in your efforts to avoid pitfalls and poor results. Associated with Himel Financial Services, at
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