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Have More Control Over Your Retirement Income

May 06, 2020

Maximization your Social Security Income

Many individuals who are planning for retirement look to Social Security as an important source of their retirement income. If you’re thinking ahead to retirement yourself, you may already know that the earlier you start to receive your Social Security benefits (for example, at age 62), the more your monthly check will be reduced. And the closer you are to your statutory retirement age — also known as “full retirement age” — when you begin collecting benefits, the more your Social Security check will be. Full retirement age, which is based on your year of birth, can be as high as age 67.

How significant is the difference?

A worker who is eligible to receive full Social Security at age 67, but decides to start collecting benefits at age 62, would receive only 70% of what would have been their full monthly payout. Individuals who wait until age 70 to start their payouts would receive 124% of their full monthly benefit.1

Why the differing benefit levels?

Because the Social Security Administration attempts to keep a worker’s lifetime benefit equal, regardless of when benefits begin.

If you can’t wait to collect Social Security…

You have a lot of company. Although you know it’s financially advantageous to delay receiving Social Security benefits, you may not wish to wait. Even if you can put off collecting Social Security, you may be worried about whether you will have enough income to maintain your standard of living in retirement — or face the possibility of running through your retirement savings during your lifetime. Many individuals feel the same way: According to the 2019 Retirement Confidence Survey Summary Report by the Employee Benefit Research Institute, only 23% of today’s workers feel very confident that they will have the ability to live comfortably in retirement.2

One solution to consider: the Social Security Maximization with Life Insurance Strategy

If you adopt this strategy and structure it properly, it could allow you to begin collecting Social Security at age 62,3 and then use the life insurance to make up the difference in your reduced benefit starting at age 70. Even if you don’t collect Social Security until your full retirement age, this strategy can help to provide you with supplemental retirement income
through the use of loans and withdrawals against your policy’s cash value.4

In the event you don’t need the supplemental income, the life insurance provides protection for your loved ones through your policy’s tax-free death benefit.5

How the Social Security Maximization with Life Insurance Strategy works

  • You purchase a life insurance policy and “overfund” it by paying the maximum amount of paid-up additions without turning your policy into a Modified Endowment Contract (MEC).6
  • You elect to take your Social Security benefit at age 62 (or whenever you like).
  • At age 70, you take loans/withdrawals from the life insurance policy to make up the difference between the benefit you would have received had you waited until age 70, and the benefit you are currently receiving.
  • At your death, your beneficiaries will receive your policy’s death benefit income-tax free.7

The advantages are many.

The Social Security Maximization with Life Insurance Strategy offers you and your loved ones numerous benefits:

  • You are able to begin collecting monthly Social Security benefits when you wish, while still having a higher amount of income in retirement.
  • During your lifetime:
    • Your policy’s cash value will grow tax-deferred.
    • You’ll have a tax-favored source for supplemental retirement income, if needed:
      • Distributions taken from a life insurance policy that is not a Modified Endowment Contract typically receive favorable tax treatment.
      • Withdrawals and loans are income tax-free up to the sum of the premiums paid. Loans in excess of the premiums paid are not taxable while your policy is in force.
      • Upon your death, your beneficiaries will generally receive your policy’s death benefit income tax-free.

Special Consideration

  • Care should be taken to ensure your policy does not become a Modified Endowment Contract.
  • If you own your policy, the death proceeds will be includable in your estate for estate tax purposes,

Learn More Today. Contact us to discover how the Social Security Maximization with Life Insurance Strategy can help you enjoy your retirement income on your terms.

Pub10163 (09/19) 2019-84754 (Exp. 09/21)
1 Source: SSI Website, Effect of Early or Delayed Retirement on Retirement Benefits,
2 Source: 2019 Retirement Confidence Survey Summary Report, Employee Benefit Research Institute, April 23, 2019,
3 The timing of the receipt of Social Security benefits is a complex subject. The best date to take benefits will vary, based on a number of factors. These materials do not cover all the options you can and should consider, but only address making up a shortfall should you elect to choose to initiate your Social Security benefits before reaching full retirement age. Contact the Social Security Administration for complete details regarding eligibility for your benefits. 
4 Supplemental income from a whole life policy comes from loans and withdrawals. Normally, cash values accumulate over the long term. Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income tax.
5 Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
6 Paid-up additions are purchases of additional insurance (death benefit) that have a cash value. These purchases are made with dividends and/or a rider that allows the policyholder to pay an additional premium over and above the base premium. This creates the growth of death benefit and cash values in a participating whole life policy. Adding large amounts of paid-up additions may create a Modified Endowment Contract. A Modified Endowment Contract (MEC) is a type of life insurance contract that is subject to first-in-first-out (FIFO) ordinary income tax treatment, similar to distributions from an annuity. The distribution may also be subject to a 10% federal tax penalty on the gain portion of the policy if the owner is under age 59½. The death benefit is generally income tax free. The paid-up additions rider incurs an additional cost.
7 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors. Guardian® is a registered trademark of The Guardian Life Insurance Company of America.
© Copyright 2019 The Guardian Life Insurance Company of America.