Last updated: July 23, 2026
The annuity bridge strategy is one of the most powerful – and underused – retirement income moves available to pre-retirees in their early 60s. The concept is straightforward: use annuity income to cover your living expenses from age 62 to 70, so you can let your Social Security benefit grow at 8% per year through SSA delayed retirement credits. Done right, this approach can generate tens of thousands – sometimes hundreds of thousands – of dollars in additional lifetime income.
What Is the Annuity Bridge Strategy?
The annuity bridge strategy means buying an annuity that pays you income for a defined period (typically 7-8 years), so you can retire now but delay Social Security until age 70. The annuity acts as a “bridge” – replacing the Social Security income you would have taken early – while your benefit continues to grow in the background.
Most retirees claim Social Security at 62 or 63 simply because they need the income. The bridge strategy solves that problem by creating an alternative income source during the gap years. When the annuity period ends, you flip on your Social Security – which is now dramatically larger.
Why Does Delaying Social Security to 70 Matter So Much?
Delaying Social Security from age 62 to 70 increases your monthly benefit by approximately 77% for those born in 1960 or later. Here is how the math works out across the claiming spectrum:
| Claiming Age | % of Full Benefit | Example Monthly Benefit (FRA = $2,100) |
|---|---|---|
| 62 | 70% | $1,470 |
| 63 | 75% | $1,575 |
| 64 | 80% | $1,680 |
| 65 | 86.7% | $1,821 |
| 67 (FRA) | 100% | $2,100 |
| 70 | 124% | $2,604 |
You can verify these percentages directly in the SSA early claiming reduction table. For people born in 1960 or later, the Full Retirement Age is 67 (look up yours on our Full Retirement Age guide). The difference between claiming at 63 ($1,575/month) versus 70 ($2,604/month) is $1,029 per month – for life.
A Real Example: How David Used a MYGA Bridge
David is 63 years old, recently retired, and has $250,000 in a rollover IRA. His projected Social Security benefit at his Full Retirement Age (67) is $2,100 per month.
Option A – Claim at 63: David takes Social Security now at 75% of his FRA benefit and receives $1,575 per month for life.
Option B – Fund a 7-Year Bridge: David uses $200,000 of his rollover IRA to fund seven years of bridge income – either a 7-year period-certain SPIA paying a level monthly check, or a ladder of MYGAs maturing each year so each rung releases principal penalty-free when he needs it (see current MYGA rates). A single MYGA cannot fund the whole bridge by itself, because free withdrawals are capped at roughly 10% of account value per year. At 70, the bridge is spent and he claims Social Security at $2,604 per month.
Over the first 10 years after claiming at 70 (ages 70-80), David collects $312,480 in Social Security ($2,604 x 120 months). Under Option A over the same period starting at 63 (ages 63-73), David collects $189,000 ($1,575 x 120 months). The difference is $123,480 – and that gap grows every year he lives past 80 because of COLAs and the larger base benefit.
Which Annuity Types Work Best as a Bridge?
MYGA (Multi-Year Guaranteed Annuity) – Most Flexible
A MYGA locks in a fixed interest rate for a set term (typically 3 to 10 years) and grows tax-deferred. Access during the term is limited, though: most contracts allow free withdrawals of about 10% of account value per year, and anything beyond that triggers surrender charges. The accurate way to bridge with MYGAs is a ladder – terms maturing in successive years, each releasing its principal and interest penalty-free right on schedule.
SPIA (Single Premium Immediate Annuity) – Maximum Income Certainty
A single premium immediate annuity (SPIA) converts a lump sum into an immediate income stream that starts within 30 days. For a bridge strategy, you would buy a “period certain” SPIA – say, 7 years – that pays a fixed monthly amount until you reach 70. SPIAs offer the highest monthly payout per dollar invested but provide zero flexibility. To understand how much a $200,000 annuity pays per month, the answer varies significantly between a MYGA and a SPIA.
DIA (Deferred Income Annuity) – Lowest Cost for Future Income
A Deferred Income Annuity lets you deposit money today and choose a future income start date. You do not receive income during the deferral period; you are locking in a guaranteed income stream that starts when you choose. DIAs are the least expensive way to guarantee future income because the insurance company earns years of investment returns on your premium before paying you. A DIA is best used as a supplement alongside a MYGA or other liquid assets, not as a standalone bridge tool.
MYGA Bridge vs. SPIA Bridge vs. Claiming Early – Side by Side
| Factor | MYGA Bridge | SPIA Bridge | Claim Early at 62-63 |
|---|---|---|---|
| Flexibility | High if laddered – free withdrawals capped near 10%/yr | Low – fixed monthly check only | Moderate – SS is fixed, no principal |
| Income Certainty | Medium – you manage withdrawals | High – guaranteed monthly payment | High – but permanently reduced |
| Upside (Age 70+) | Very high – max SS + remaining IRA | Very high – max SS benefit | Low – locked in at reduced rate forever |
| Emergency Access | Partial – free withdrawals; charges beyond the cap | No – lump sum is gone | N/A – no lump sum involved |
| Survivor Benefit | Yes – remaining IRA balance + higher SS | Depends on SPIA terms – often none | Yes – but at reduced SS amount |
If you want flexibility and still want to leave money to heirs, a MYGA bridge is typically the better fit. For those who want the best of both worlds, a split approach works: fund the SPIA with enough to cover fixed monthly expenses, put the rest in a MYGA for flexibility, and consider a guaranteed lifetime withdrawal benefit (GLWB) rider for longevity protection after 70.
Who Is the Annuity Bridge Strategy Best For?
Married couples get an outsized benefit. When the higher-earning spouse delays to 70, the surviving spouse inherits that larger benefit as a survivor benefit for life. A spouse who lives to 90 can collect an additional $200,000 or more in lifetime Social Security compared to what they would have received from an early-claiming survivor benefit.
People in good health have the most to gain because the math favors those who live past the break-even point – typically around age 78 to 80.
Those with $150,000 or more in liquid IRA or savings assets have enough capital to fund a meaningful bridge. Trying to bridge with $80,000 while needing $2,500/month is a math problem that does not work. You need enough to cover the gap years without completely depleting your reserves.
Who Should NOT Use the Annuity Bridge Strategy?
Poor health or shortened life expectancy changes the math significantly. If you have a serious health condition and do not expect to live past 78, the break-even never arrives.
No liquid emergency reserve is a deal-breaker. Never fund a bridge strategy in a way that leaves you without access to at least 3-6 months of expenses.
People who genuinely cannot afford to retire at 62 without Social Security should not force the strategy. If you need the income and have no other assets, delaying SS is better accomplished by working a few additional years than by purchasing an annuity you cannot afford to fund properly.
If you are thinking about how to retire at 62, it is worth running both scenarios – claiming early versus bridging – side by side with a financial professional before making a decision.
What About Taxes on a Larger Social Security Benefit?
Up to 85% of your Social Security benefit is taxable if your combined income (adjusted gross income plus half of your SS benefit) exceeds $44,000 for married couples. A larger SS benefit can cause more of your income to be subject to tax at ordinary rates. However, the additional benefit you receive by delaying to 70 almost always exceeds the incremental tax cost.
Note that early withdrawals from an IRA before age 59.5 are generally subject to a 10% penalty, though the IRS exceptions to early distribution penalty include several provisions relevant to retirees.
How Much Do You Need to Fund an Annuity Bridge?
A rough formula: multiply your monthly income gap by 12, then by the number of bridge years – $2,000 per month for 7 years is $2,000 x 12 x 7 = $168,000 of total income. A period-certain SPIA usually costs less than that up front, because the insurer prices in the interest your premium keeps earning; a MYGA ladder needs roughly the full amount split across rungs. See the best annuities for bridging to Social Security and its bridge calculator for current numbers.
Related Reading
- Best Annuities for Bridging to Social Security (2026)
- When Should I Claim Social Security? Age 62 vs. 67 vs. 70
- Full Retirement Age Chart by Birth Year
- How to Retire at 62: A Step-by-Step Income Plan
- How Much Does a $200,000 Annuity Pay Per Month?
- Guaranteed Lifetime Withdrawal Benefit (GLWB) Riders Explained
- Current MYGA Rates – Updated Weekly
Sources and Further Reading:
- NBER: Optimal Social Security Claiming and Bridge Strategies
- U.S. Treasury: Current Yield Curve (rate context)
Frequently Asked Questions
What is the annuity bridge strategy?
The annuity bridge strategy is a retirement income approach where you use annuity income to cover living expenses from age 62 to 70, allowing your Social Security benefit to grow at 8% per year through delayed retirement credits. When you reach 70, you stop drawing from the annuity and claim a significantly larger Social Security benefit for life.
How much does delaying Social Security to age 70 increase your benefit?
For those born in 1960 or later, delaying Social Security from age 62 to age 70 increases your monthly benefit by approximately 77%. Claiming at 62 pays 70% of your Full Retirement Age benefit, while claiming at 70 pays 124% of your FRA benefit.
Can you use a rollover IRA to fund a bridge annuity?
Yes. A Multi-Year Guaranteed Annuity (MYGA) purchased inside a rollover IRA is one of the most common annuity bridge vehicles. Distributions are taxed as ordinary income, and there is no additional tax layer from the annuity itself since the IRA already provides tax deferral. Withdrawals before age 59.5 may be subject to a 10% early distribution penalty unless an IRS exception applies.
What happens to your annuity bridge if you die before age 70?
If you die before claiming Social Security, your surviving spouse may be eligible for a survivor benefit based on your record. Any remaining balance in a MYGA would pass to named beneficiaries. For a SPIA, death benefits depend on the specific period-certain or joint-life terms selected at purchase.
Is the annuity bridge strategy right for everyone?
No. The strategy works best for married couples in good health who have at least $150,000 in liquid assets available to fund the bridge period. It is generally not a good fit for people with poor health or shortened life expectancy, those with no emergency reserve outside the annuity, or people who need full liquidity and flexibility from all of their assets.
