The Social Security Dilemma: Take it Now, Or Wait? – Part 2

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.

In the first part of our presentation on the Social Security Dilemma, we suggested that the breadwinner (or older) member of the family take the SS payments at Full Retirement Age (FRA).  Assuming the cash is not necessary for immediate living expenses, use that to purchase a “10-pay” Whole Life insurance policy.  That will create 1) protection through the death benefit (DB), 2) added eventual income through the build-up of growing cash value (CV), 3) Possibility of Long-Term Care support, and 4) flexibility in the use of any or all of these benefits, or optionality overall.

What do we do with a spouse who might have a Social Security benefit coming as well?

Well, if the spouse is younger than FRA, but 62 or older, that spouse can take the SS income, discounted for each year before FRA, and purchase the Whole Life insurance.  Of course, the size of the policy would be in line with the SS payments.  If the spouse is FRA or older, and has been waiting for age 70 (for higher dollars), again, purchase Whole Life and expand options!

The policy would be a “10-pay”; premiums for 10 years only.  After that, the policy is fully paid-for, and will continue to grow.  The social security income would then be channeled to the spouse or family, and additional income could be taken from the policy as well.

Why would that approach make sense?  The benefits gained would be the same as the breadwinner’s; that is, protection (DB), eventual income, and flexibility.  Qualifying for life insurance is easier, the younger and healthier you are when applying.  The younger you are when purchasing the policy, the more efficient the policy is in growing value for the future. 

One more thing, even if a bit dark: if one spouse dies, the survivor will receive (at the appropriate time) the higher of the two social security benefits; not both.  Taking the second income (before any death) assures more financial certainty; at least some is taken from that second pocket before any potential stoppage.

Take both incomes sooner rather than later?

Maybe this is a bit of a gamble, but it is also a hedge…a way to ensure that the long-term plan for your later years grabs as many benefits as possible, as soon as available, as long as the approach makes sense in your situation.

In summary, if the Social Security income is not immediately necessary to pay bills, and you are (or soon will be) of the age where you can grab that income, there is an option.  You can take social security income to create insurance protection for the family, to create a growing cash balance (through the whole life policy), to create additional future income, in addition to the social security check, and most of all, flexibility.

Whole Life (of a specific structure) lends itself to this approach.  Indexed Universal Life insurance does not.  IUL relies on the stock market, and therefore leans on the inherent volatility while costs increase.  We view that as a poor way to exist in the “golden years”.  Whole Life, with guarantees, would provide more relaxed comfort.

Here is a link to The Social Security Dilemma: Take it Now, Or Wait? (Part 1):

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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