Using Retirement Funds to "Mind the Gap" for Social Security Benefits
April 22, 2022
Blog Image


The average Social Security benefit in 2022 is $1,657 per month. Delaying the claim until age 70 could raise that benefit by 29.3%1 or to $2,142 per month. The challenge for most is how to cover the gap in income from retirement until age 70.


Would your client benefit from having a Social Security benefit that is up to 30% greater than the benefit he or she would receive at full retirement age (FRA)? For many clients, yes. Especially if that benefit has a cost-of-living adjustment (COLA) that can help address inflation risk. However, to achieve that, the client would need to replace Social Security benefit payments with another form of protected income. One option is to use a variable annuity with an optional guaranteed minimum withdrawal benefit (GMWB) for an additional cost that allows 7% withdrawals starting at age 65.

Replacing the average Social Security benefit of $1,657 per month with a variable annuity with a GMWB that provides a 7% income benefit at ages 65—69 may require much less capital than other replacement methods. At age 70, a client would make a delayed claim for Social Security benefits and either continue, reduce, or stop altogether the guaranteed withdrawal benefit.

Why might this be a good strategy? It can secure a higher guaranteed income floor with a COLA. Social Security benefits are the only source of inflation-adjusted guaranteed income for most retirees. By delaying the claim, a client, or his/her surviving spouse, has a higher level of income with COLA protection—which in 2022 is 5.9%!

Additionally, this may offer a tax benefit on two fronts: Social Security benefits are relatively tax-efficient with a maximum of 85% included in taxable income. Deriving more income from more of one’s income from this source could have a positive tax effect. This strategy also may help a client better manage required minimum distributions (RMDs) from any qualified accounts. This supports tax-bracket management.

With the COLA for Social Security retirement benefits at 5.9% in 2022, that increase in income would be a definite help in this inflationary environment. This is an excellent time to reach out to clients with longevity risk concerns and be their guide for a strategy to “mind the gap.”



For more information about retirement-planning, please contact our Retirement Strategies Group at or (800) 722-2333, ext. 3939.



1Social Security Administration. “Retirement Benefits: If you were born in 1956 your full retirement age is 66 and 4 months.” Last accessed 4/18/2022.

All guarantees are subject to the claims-paying ability and financial strength of the issuing insurance company and do not protect the value of the variable investment options, which are subject to market risk.

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.

Investors should carefully consider a variable annuity’s risks, charges, limitations, and expenses, as well as the risks, charges, expenses, and investment goals of the underlying investment options. This and other information about Pacific Life are provided in the product and underlying fund prospectuses. These prospectuses should be read carefully before investing.


This material is educational and intended for an audience with financial services knowledge.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Unless otherwise noted, all aforementioned money managers, their distributors, and affiliates are unaffiliated with Pacific Life and Pacific Select Distributors, LLC.

Pacific Life refers to Pacific Life Insurance Company and its subsidiary Pacific Life & Annuity Company. Insurance products can be issued in all states, except New York, by Pacific Life Insurance Company or Pacific Life & Annuity Company. In New York, insurance products are only issued by Pacific Life & Annuity Company. Product/material availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company and an affiliate of Pacific Life & Annuity Company. 

The home office for Pacific Life & Annuity Company is located in Phoenix, Arizona. The home office for Pacific Life Insurance Company is located in Omaha, Nebraska.

No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency

For financial professional use only. Not for use with the public.

This website or its third-party tools use cookies, which are necessary to its functioning and are required to achieve the purposes illustrated in our online privacy policy.