Using a MYGA as a Social Security Bridge Strategy

Waiting to claim Social Security is one of the most valuable moves a pre-retiree can make. The challenge is finding a reliable way to cover expenses in the meantime.

That gap between leaving the workforce and the optimal claiming date is exactly where a multi-year guaranteed annuity can step in. Not as a speculative play. Not as a product being stretched beyond its purpose. As a practical, well-matched tool for a defined window of time.

In This Article: This article covers how a MYGA can serve as a Social Security bridge, how to match the contract term to your claiming timeline, what makes this approach different from drawing down investment accounts, and when the strategy makes the most sense.

The Case for Delaying Social Security

The incentive to wait is significant. Benefits can be claimed as early as age 62, but doing so triggers a permanent reduction of up to 30%  full retirement age benefit.

For individuals born in 1960 or later, full retirement age is 67. Every year of delay past that point adds 8% to the monthly benefit, up to age 70. Waiting from 67 to 70 increases the benefit by 24%. Waiting from 62 to 70 produces a benefit that is roughly 77% higher, and that increase is permanent, inflation-adjusted, and guaranteed for life.

That is a difficult return to replicate through any other strategy. The obstacle is not the math. It is figuring out how to cover living expenses during the years before benefits begin. That is where Social Security planning and annuity strategy start to work together.

What a MYGA Brings to This Strategy

There are several ways to fund a bridge period. Portfolio withdrawals, part-time work, pension income, or some combination of all three. A MYGA occupies a distinct place in that list.

The core advantage is predictability. During the bridge years, a household needs reliable income that does not depend on what markets are doing. A fixed annuity credits interest at a guaranteed rate for the full contract term, and the principal is not exposed to market fluctuations. That stability matters most in early retirement, when a poorly timed downturn can do lasting damage to a long-term portfolio.

There is also the structural clarity a MYGA provides. Rather than managing ongoing withdrawals from multiple accounts, some households use a dedicated MYGA contract to fund the bridge window. The term is set to match the claiming delay. The contract matures around the time Social Security income begins. That alignment removes a layer of complexity during an already significant transition.

Matching the MYGA Term to Your Claiming Window

Term alignment is the most important element of this strategy. The contract should mature on a schedule that corresponds with the planned claiming date.

A few examples illustrate how this typically looks in practice. A household retiring at 62 and planning to claim at 70 may look at an 8-year contract. Someone retiring at 65 with a target claiming age of 70 might choose a 5-year term. A pre-retiree delaying only to full retirement age at 67 may need just a 2 to 3-year contract.

The goal is the same in every case. The MYGA provides structured income during the delay period and matures around the time it is no longer needed. You can explore projected values for different scenarios using the MYGA calculator to see how different terms and rates affect the end result.

It also matters to understand how income will be drawn from the contract during the bridge period. Many MYGAs allow annual withdrawals of interest without surrender charges, and some permit free withdrawals of up to 10% of the contract value each year after the first. Confirming those provisions before purchasing ensures the contract can actually do the job it is being assigned.

Tax Planning During the Bridge Period

The bridge years often create a useful window for managing taxable income. In the period between retirement and the start of Social Security, income is typically lower than during peak earning years.

That creates space to draw from pre-tax accounts at a lower marginal rate, and potentially to complete partial Roth conversions before required minimum distributions at age 73 begin adding pressure to the tax picture.

A MYGA held in a non-qualified account offers tax deferral on its growth throughout the contract term, with income tax applying only when funds are withdrawn. When coordinated thoughtfully with IRA drawdowns and Roth planning, it can strengthen the overall after-tax outcome over the course of retirement.

For qualified accounts held inside an IRA, the MYGA’s value shifts toward its guaranteed rate and contract structure rather than additional tax deferral, which is already built into the account.

When This Strategy Makes Sense and When It Doesn’t

Delayed claiming tends to produce the most value for households in good health with family histories of longevity. According to research from the Bipartisan Policy Center, most individuals who live to average life expectancy or beyond end up with more lifetime wealth by using assets to delay Social Security rather than claiming early. The break-even point generally falls somewhere between ages 78 and 82 depending on individual circumstances.

This approach also requires having assets available to fund the bridge. Households without that flexibility may not have a realistic path to delaying, regardless of the potential upside.

There are situations where delaying carries less advantage. Individuals with significant health concerns may not reach the break-even point. Those who depend entirely on Social Security for basic living costs may not have the breathing room the strategy requires.

For married couples, one additional consideration is worth noting. Delayed retirement credits do not increase a spousal benefit claimed on another person’s record. However, when the higher-earning spouse delays their own benefit, that delay increases the survivor benefit available to a lower-earning spouse, which can matter significantly over a long retirement.

Common Mistakes With a MYGA Bridge

A sound strategy can still be undermined by poor execution. A few patterns tend to surface in this context.

Choosing a contract term without confirming the claiming timeline is the most common issue. A misaligned term can result in surrender charges at precisely the moment funds need to be accessed, or a maturity date that arrives years before Social Security begins.

Treating the MYGA as the only bridge strategy is another. In most households, the bridge period works best when the MYGA is coordinated with portfolio withdrawals, tax planning, and a clear picture of near-term spending needs.

Claiming decision should never be treated as permanent from day one. Health, income needs, and financial circumstances change. The bridge plan should be revisited periodically rather than locked in and left alone.

How Matador Insurance Helps Structure a Bridge Strategy

At Matador Insurance, using a MYGA as a Social Security bridge is part of a broader retirement income planning conversation. Our Discovery, Strategy, and Annual Review process is designed to evaluate Social Security timing, annuity structure, tax planning, and income sequencing together so that each decision supports the others rather than working against them.

If you are considering when to claim Social Security and want to understand how a MYGA might support that decision, connect with our team. The goal is always the same: a clear plan that gives you confidence in the years ahead.