Social Security Can’t Be Your Whole Retirement Strategy, Especially Now

Planning ahead for when you begin receiving benefits, plotting which retirement accounts to withdraw from first and considering annuities can all help.

A Social Security card is partially obscured and surrounded by cash.
(Image credit: Getty Images)

When we begin planning for retirement, we typically start with Social Security.

This is because the payments from Social Security benefits — a guaranteed income for a lifetime that increases with costs-of-living adjustments and is tax advantaged — are often the backbone of a person’s retirement income. You want to make sure you have enough guaranteed income to cover your basic expenses.

Lately, the future of Social Security has been in the news. With threats to Social Security benefits up for political debate, it can make people anxious about their retirement strategy. Nearly three in four Americans (74%) said they can’t count on Social Security benefits when planning retirement income in the latest Quarterly Market Perceptions Study* from Allianz Life Insurance Company of North America (Allianz).

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While Social Security will play an important role in your retirement strategy, it cannot be your entire strategy. Here are some tips to ensure confidence in your retirement strategy, regardless of what happens in Washington, D.C.

Plan for Social Security now

You want to maximize the benefits you receive from Social Security. That involves preparation. A number of factors affect how much a person receives in Social Security benefits. Your work history, benefit start date, full retirement age (FRA), taxes and other income sources should all be considered.

For example, while you can start claiming Social Security at age 62, you will receive a much smaller monthly amount — up to 30% less than at FRA. If you wait until you are older and either at or closer to FRA, you can receive larger payments. That doesn’t mean you have to keep working until you are ready to claim Social Security. It does mean that if you want to retire at 63 and start taking Social Security at 66, you have three years of essential expenses to pay for without that benefit.

Take IRA distributions before Social Security

An IRA is an important part of many retirement strategies. The funds saved in an IRA can serve as a source of income throughout retirement. But an IRA can be a big tax burden if it is your sole source of income later on in retirement. Distributions from IRAs are generally taxed at regular income tax rates, which can and often do change. So, you could be paying higher taxes to fund your needs later in retirement. This account has required minimum distributions (RMDs) that get bigger as you age. That means you are required to withdraw money and pay taxes on it, even if you don’t want it.

In some cases, withdrawing earlier from an IRA to delay taking Social Security benefits can be advantageous. This will increase your Social Security benefits later on and decrease your RMDs. If one of your financial goals is to leave an inheritance for beneficiaries, an IRA is not an ideal account from a tax perspective.

In general, you don’t want to have too much money in one category for taxes. That can be a recipe for paying way too much in taxes while not getting the guaranteed income that you want. In general, your draw-down strategy for your retirement should be optimized for taxes. This requires planning ahead and consulting a professional to design a plan that’s right for you. Some experts have proposed that you can actually increase how much you can spend in retirement by creating a tax-efficient withdrawal plan.

Add another source of guaranteed income

After assessing your potential Social Security payments, then a financial professional will look at a pension, if you have one, or other guaranteed income product.

A guaranteed income product, like an annuity, which is a vehicle designed as a long-term product, to help provide income in retirement for a portion of retirement savings, can help ease financial worries moving forward by adding some certainty to your finances in retirement. An annuity with a dependable stream of income within a portfolio can alleviate some of the fear of running out of money during retirement.

About five to 10 years before retirement, it is time to consider adding a guaranteed income product into your portfolio. Some guaranteed income products offer the opportunity for increasing income throughout retirement. This means that the products can help mitigate the risk of inflation and increasing cost of living.

While the future of Social Security can feel like an unknown in your retirement strategy, you can make financial moves to mitigate the risk. A holistic retirement strategy with a diversified portfolio and another source of guaranteed lifetime income can help you feel more confident.

*Allianz Life conducted an online survey, the 2023 1Q Quarterly Market Perceptions Study in March 2023 with a nationally representative sample of 1,005 respondents age 18+.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

Products are issued by Allianz Life Insurance Company of North America and distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427

Any distributions are subject to ordinary income tax and, if taken prior to age 59½, a 10% federal additional tax.

Withdrawals will reduce the contract value and the value of any protection benefits. Withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax.

This content is for general educational purposes only. It is not, however, intended to provide fiduciary, tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give fiduciary, tax or legal advice or advice related to social security or

Medicare. Clients are encouraged to consult their tax advisor or attorney or Social Security Administration (SSA) office for their particular situation.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Kelly LaVigne, J.D.
Vice President, Advanced Markets, Allianz Life

Kelly LaVigne is vice president of advanced markets for Allianz Life Insurance Co., where he is responsible for the development of programs that assist financial professionals in serving clients with retirement, estate planning and tax-related strategies.