How Annuities Integrate with Social Security and Medicare

By Fraser Allport – Fiduciary, Retirement Advisor, and Certified Estate Planner ™43 Years of Experience … and Experience Matters

If you’re nearing retirement—or already there—you’ve probably asked:

“How do annuities fit in with my Social Security and Medicare benefits?”

That’s a good question.

After 43 years of helping my Clients build income strategies for retirement, I can tell you this: Social Security, Medicare, and annuities should work together in sync. The key is to understand how they interact with each other.

In this article, I’ll explain how annuity income affects your Social Security benefits, whether it impacts your Medicare premiums, and how I structure retirement plans to keep your money protected and tax-efficient.

First, What’s an Annuity?

If you’re new to annuities, here’s a quick recap:

An annuity is a financial contract with an insurance company that provides guaranteed income, typically for life. You invest a lump sum or series of payments, and you receive regular income—now or deferred.

There are several types of annuities, but I recommend fixed and fixed-indexed annuities in retirement planning for their safety of principal and lifetime income guarantees.

How Annuity Income Affects Social Security

Good News: Annuities Don’t Reduce Your Social Security Benefits

Let’s clarify: You will not lose your Social Security or have it reduced if you buy or receive income from an annuity.

However… annuity income can affect how much of your Social Security is taxed. That’s where tax strategy matters.

The IRS determines if your Social Security benefits are taxable based on your "provisional income." Provisional Income includes:

An individual's provisional income is calculated by adding together their adjusted gross income (AGI), their nontaxable interest (like a ROTH or Tax Free Bonds), and one-half of their Social Security benefits. The resulting amount is compared to specific thresholds to determine the portion of the benefits that will be subject to taxation.

If your annuity generates taxable income, it might affect how your Social Security is taxed.

Here’s the IRS breakdown: for 2025

Filing Status	Provisional Income	Taxable % of SS
Single	$25,000–$34,000	Up to 50%
Single	Over $34,000	Up to 85%
Married Filing Jointly	$32,000–$44,000	Up to 50%
Married Filing Jointly	Over $44,000	Up to 85%

We need to calculate your provisional income before adding annuities to your plan, so that we can structure income in the most tax-efficient way possible for you.

Will Annuities Affect Medicare Premiums?

Yes, potentially. Here’s how it works:

Medicare Part B (outpatient visits) and Part D (prescription coverage) premiums are means-tested: meaning that the more income you have, the more you may pay. This is known as IRMAA (Income-Related Monthly Adjustment Amount).³

What counts as income for IRMAA?

The IRS looks at your Modified Adjusted Gross Income (MAGI) from two years prior. That includes:

• IRA and Pension income

• Wages

• Dividends

• Rental income

• Taxable annuity income

Example:

If your MAGI (Modified Adjusted Gross Income) exceeds $103,000 (single) or $206,000 (married filing jointly) in 2025, you’ll pay more than the standard Part B and D premiums.⁴

Tax-Smart Annuity Strategies I Use with My Clients

You don’t have to choose between annuities and keeping your Social Security and Medicare benefits. I design annuity plans for my Clients that:

• Control how and when income is taxed (e.g., deferred vs. immediate annuities, non-qualified vs. qualified funds)

• Spread income over time to avoid big one-year tax hits

• Pair annuities with Roth strategies to lower future taxable income

• Time withdrawals strategically to stay under key Medicare thresholds

Every Client’s situation is different, so I run the numbers tailored for you. We look at your Social Security, Medicare status, RMDs (if you’re age 73+), and more. Then, we build a customized, coordinated plan just for your situation and needs.

A Note on Qualified vs. Non-Qualified Annuities

Qualified annuities are purchased with pre-tax retirement dollars (like from an IRA). All withdrawals are taxable and count towards the IRS’ Required Minimum Distribution.

Non-qualified annuities are funded with after-tax dollars. Only the earnings are taxable.

In sum, I help my Clients choose the right Annuity based on their tax brackets, income needs, and benefit coordination.

Final Thoughts from Fraser Allport

Social Security and Medicare are the bedrock of retirement for most Americans. But they weren’t designed to cover all your expenses—especially with inflation, healthcare costs, and longer lifespans.

That’s where annuities come in. They fill the income gap and coordinate seamlessly with your Social Security and Medicare benefits when used together in harmony.

The key is not just buying an annuity. The goal is to strategically integrate the annuity into your holistic retirement plan.

If you want help designing a plan that works in harmony with your Social Security and Medicare — and not against them — please call me at 386.882.6256 for a complimentary consultation, or schedule a consult with me online at www.calendly.com/fiduciaryadvisor. I’ll walk you through comprehensive retirement planning step by step. It’s easy. You just need to start the process.

Together, as a Team, we will build you a “Life Plan” focused on safety of principal and lifetime income.

About Fraser

Fraser is an Independent Fiduciary, and the Owner of The Total Advisor, LLC, specializing in Retirement, Income Tax, and Estate Planning. Fraser also has core expertise in Social Security, Medicare, Long Term Care, Home Health Care, Life Insurance and Annuities.

Fraser has been in Business 43 Years. He will be there when you need him.

Experience Matters

Fraser’s Florida license # A 004461 and L 0947754

Fraser’s Bio, Credentials, Services and Client Reviews are at: www.FraserAllport.com

Sources

ⁱ U.S. Social Security Administration. “Benefits Planner: Income Taxes and Your Social Security.” www.ssa.gov

² Internal Revenue Service. “Social Security Benefits Worksheet.” www.irs.gov

³ Medicare.gov. “Medicare Costs: How Income Affects Your Premium.” www.medicare.gov

⁴ Centers for Medicare & Medicaid Services. 2025 IRMAA Premium Brackets. www.cms.gov

⁵ National Association of Insurance Commissioners. “Annuities: What You Should Know.”https://content.naic.org/https://www.fraserallport.com/annuitieshttps://www.fraserallport.com/post/the-history-and-origins-of-the-annuity

“All Knowledge comes from Experience.” – Albert Einstein