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Can I Collect Social Security and an Annuity?
July 30, 2025
10 min
U.S. Treasury Check And Social Security Card

This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions. 

For many Americans approaching retirement, maximizing income streams becomes a critical financial priority. Two common sources of retirement income are Social Security benefits and annuities, leading many to wonder whether they can collect both simultaneously. The straightforward answer is yes—in most cases, you can collect Social Security benefits and annuity payments at the same time. However, the interaction between these two income sources involves important considerations regarding taxes, timing, and overall retirement planning strategy. 

Understanding Social Security benefits 

Social Security provides a foundation of retirement income for millions of Americans. The program operates as a pay-as-you-go system where current workers contribute through payroll taxes to fund benefits for current retirees. Your Social Security benefit amount depends on your highest 35 years of earnings, adjusted for inflation, and the age at which you begin claiming benefits. 

Full retirement age varies depending on your birth year, ranging from 65 to 67. You can claim reduced benefits as early as age 62, or you can delay claiming until age 70 to receive delayed retirement credits that increase your monthly benefit amount. The Social Security Administration calculates your primary insurance amount based on a progressive formula that replaces a higher percentage of pre-retirement income for lower earners. 

What are annuities? 

An annuity is a financial product typically sold by insurance companies that provides regular payments to the holder, usually starting immediately or at some future date. Annuities serve as a form of insurance against outliving your money, providing guaranteed income for a specified period or for life. There are several types of annuities, each with distinct characteristics: 

  • Immediate annuities begin payments shortly after purchase. 
  • Deferred annuities accumulate value over time before payments begin.  
  • Fixed annuities provide guaranteed payment amounts. 
  • Variable annuities tie payments to investment performance.  
  • Indexed annuities offer returns linked to market indexes but with downside protection. 

People purchase annuities for various reasons, including guaranteed income, tax-deferred growth, death benefits for beneficiaries, and protection against market volatility. However, annuities also come with potential drawbacks such as high fees, surrender charges, complexity, and limited liquidity. 

Can you collect both Annuity Payments and Social Security? 

The fundamental question of whether you can collect both Social Security and annuity payments has a clear answer: yes, you generally can receive both forms of income simultaneously. Social Security benefits and private annuity payments operate independently of each other in most circumstances. 

This independence exists because Social Security is a government program funded through payroll taxes, while annuities are private financial products. The Social Security Administration does not typically reduce your benefits based on annuity income you receive. Similarly, insurance companies paying annuity benefits do not reduce payments based on your Social Security income. 

However, there are some important exceptions and considerations: 

  • If you work for a government entity that did not pay into Social Security and instead provided a pension plan, you might be subject to the Windfall Elimination Provision or Government Pension Offset, which can reduce Social Security benefits. 
  • If you’re still working and earning income while receiving Social Security before full retirement age, your benefits may be temporarily reduced regardless of whether you also receive annuity payments. 

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Tax implications 

One of the most significant considerations when collecting both Social Security and annuity income involves taxation. The tax treatment of these income streams differs substantially and can affect your overall tax liability. 

Social Security benefits may be subject to federal income tax depending on your total income. If your combined income (adjusted gross income plus nontaxable interest plus half of your Social Security benefits) exceeds certain thresholds, a portion of your Social Security benefits becomes taxable. For individual filers, these thresholds are $25,000 and $34,000, while for married couples filing jointly, they are $32,000 and $44,000. 

Annuity taxation depends on how you funded the annuity and the type of annuity you own. If you purchased the annuity with after-tax dollars, only the earnings portion of each payment is taxable, while the principal portion represents a return of your investment and is not taxed. This is calculated using an exclusion ratio provided by the insurance company. 

However, if you purchased the annuity with pre-tax dollars through a qualified retirement plan like a 401(k) or traditional IRA, the entire payment is typically taxable as ordinary income. Variable annuities within qualified plans may have different tax implications depending on the specific structure and withdrawal method. 

The combination of Social Security and annuity income can push you into higher tax brackets or make more of your Social Security benefits taxable. This interaction requires careful planning to manage your overall tax burden effectively. 

Strategic considerations 

Successfully integrating Social Security and annuity income into your retirement plan requires strategic thinking about timing, amounts, and coordination with other income sources. 

  • Timing plays a crucial role in optimizing both income streams. Delaying Social Security past full retirement age increases your monthly benefit by approximately 8% per year until age 70. This delay might make sense if you have other income sources, including annuity payments, to support you during the delay period. Conversely, if you need immediate income and have limited other resources, claiming Social Security earlier while also receiving annuity payments might be appropriate. 
  • The amount and type of annuity you choose should complement your Social Security benefits rather than simply adding income. Consider your total retirement income needs, your risk tolerance, and how much guaranteed income you want versus income that might fluctuate with market conditions. 
  • Integration with other retirement accounts also matters. If you have substantial traditional IRA or 401(k) balances, the required minimum distributions that begin at age 73 will add to your taxable income along with any taxable portions of Social Security and annuity payments. Planning the timing and amounts of withdrawals from various accounts can help manage your tax liability. 

Types of annuities and Social Security coordination 

Different types of annuities interact with Social Security planning in various ways. Understanding these differences can help you choose the most appropriate annuity type for your situation. 

  • Fixed immediate annuities provide predictable income that can complement Social Security’s guaranteed benefits. This combination creates a strong foundation of guaranteed retirement income, reducing sequence of returns risk in your portfolio. You can calculate exactly how much income these two sources will provide and plan accordingly for additional needs. 
  • Deferred income annuities, also known as longevity insurance, begin payments at an advanced age, such as 80 or 85. These products can work well with Social Security because they provide additional guaranteed income later in retirement when other assets might be depleted and when Social Security alone might not be sufficient. 
  • Variable annuities offer potential for higher returns but with corresponding risk. When combined with the guaranteed nature of Social Security, variable annuities might provide a balance between guaranteed income and growth potential. However, the fees associated with variable annuities can be substantial, and the tax implications of variable annuity withdrawals combined with Social Security should be carefully considered. 
  • Indexed annuities attempt to provide some upside potential while protecting against losses. These might appeal to retirees who want some growth potential beyond what Social Security provides while maintaining downside protection. 

Common mistakes to avoid 

Several common mistakes can undermine the effectiveness of collecting both Social Security and annuity income. 

  • Failing to consider the tax implications of receiving both income streams. The combined income from Social Security and annuities might push you into a higher tax bracket or make more of your Social Security benefits taxable than you anticipated. This can result in an unexpectedly high tax bill and reduced after-tax income. 
  • Not considering how your annuity fits with your Social Security benefits and overall retirement plan. Some people buy annuities simply for the promise of guaranteed income without analyzing whether they actually need additional guaranteed income beyond Social Security and whether the annuity’s features and costs are appropriate for their situation. 
  • Timing mistakes are also common. Some individuals claim Social Security early because they want to maximize their total guaranteed income by combining it with annuity payments, not realizing that delaying Social Security could provide much higher lifetime benefits. Others delay Social Security unnecessarily while living on annuity payments, missing opportunities to optimize their overall income strategy. 
  • Failing to understand the specific terms and conditions of annuity products represents another frequent error. Annuities can be complex, with various riders, surrender charges, and payout options. Not understanding these features can lead to surprises later and suboptimal decisions about when and how to access your money. 

Planning considerations for different life stages 

The interaction between Social Security and annuities varies depending on your life stage and circumstances. 

  • For individuals in their 50s and early 60s, the focus should be on understanding how these income sources will work together and making appropriate preparations. This might involve calculating projected Social Security benefits, researching annuity options, and developing a comprehensive retirement income strategy that considers timing, taxes, and total income needs. 
  • Those approaching full retirement age need to make concrete decisions about when to claim Social Security and whether to purchase annuities. The decision should consider current financial needs, health status, family longevity, other income sources, and overall financial goals. 
  • For current retirees already receiving one or both income sources, the focus shifts to optimization and adjustment. This might involve managing tax liability, coordinating withdrawals from other accounts, and potentially making changes to annuity elections if permitted. 
  • Married couples face additional considerations, including spousal benefits, survivor benefits, and coordination between two sets of Social Security benefits and potentially multiple annuities. The claiming strategy for one spouse affects the other, and annuity purchases should consider both spouses’ needs and the need for survivor income. 

Final thoughts 

Collecting both Social Security benefits and annuity payments is not only possible but can be an effective strategy for creating retirement income security. The key lies in understanding how these income sources work together, managing the tax implications, and ensuring that your overall strategy aligns with your retirement goals and financial situation. 

Success in coordinating these income sources requires understanding your specific situation, researching your options thoroughly, and often seeking professional guidance. The investment in proper planning can pay dividends throughout your retirement by maximizing your income, minimizing your taxes, and providing the financial security you need to enjoy your retirement years. 

Pave the way with Stone Street 

Do you need upfront money for any of the following? 

  • Annuity
  • Structured Settlement
  • Inherited Annuity
  • Assignable Annuity 

If so, selling your payments for a lump sum may be the right option for you. We will work with you one-on-one so you get the sale option that best fits your needs: 

  • One-on-one consultation.
  • Customized solution just for you.
  • Customer service you can count on. 

Call us at 866-416-5118 to talk about your financial needs and what annuity payments you have coming to you. We’ll do the hard work and handle the rest of the process!* 

Stone Street is a purchaser of future payment streams. Stone Street does not provide financial advice.  

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