As with any investment projection, assumptions matter. Levine assumed that the typical annuity investor would generate an average annual return of 5 percent after fees and an index universal life policyholder would earn 6 percent a year after fees.
The growth rate for U.S. stocks is expected range from 4 percent to 6.5 percent annually over the next 20 years, according to a recent report from the McKinsey Global Institute, which Levine cited in her research.
"Five percent is a relatively conservative growth rate and is within the current expected range of return considered to be reasonable by the financial industry," Levine said.
Earning a steady 5 percent annual return from variable annuities may not work out for many investors.
"The common challenge of using deterministic returns — 5 percent static return year in and year out — is that there is no consideration for the real world and the likely randomness that will be experienced," said Kevin Loffredi, senior product manager of annuity solutions at Morningstar.
Even if a 5 percent expected return is reasonable, Levine underestimates the average cost of variable annuities.
The typical variable annuity is loaded with fees. The administration and distribution fees can be as high as 0.6 percent annually. The underlying investment subaccounts have fees that range from 0.28 percent to 3.26 percent annually. The average subaccount charges 0.97 percent annually, according to Morningstar.
On top of all those fees, variable annuities have onerous surrender charges that range from 7 percent to 9 percent and decrease each year that the contract is in force until they reach zero.
Levine used a low-cost variable annuity from Jefferson National in her calculations that showed investors could use the product to generate as much benefit payments as those who waited to claim Social Security at 70. Jefferson National charges a flat annual fee of $240 and 0.05 percent to 0.35 percent annually for certain subaccounts. The insurer has a B+ rating from A.M. Best, meaning it has a "good" ability to meet its financial obligations.
"I do not like the usual variable annuity and I never use it," she said. Levine said she prefers the variable annuity from Jefferson National because it offers lower than average fees.
Here's how the simplest scenario Levine evaluated worked with a variable annuity:
Let's say an individual beneficiary receives $30,000 per year in Social Security retirement benefits at age 66 with a 3 percent cost of living adjustment and is taxed at a 28 percent federal income tax rate.
If that person lives to age 100, they would receive a total of $1.38 million in Social Security benefits. If that person waited until age 70 to claim, they would receive nearly $1.7 million in Social Security benefits if they lived to 100.
If that person invested the first four years of their Social Security benefits they claimed at age 66 in a low-cost, tax-deferred annuity that returns 5 percent a year, they would have a total of $1.87 million in benefits at age 100.
Levine's strategy would generate roughly $174,000 more in benefits than if a person claimed Social Security at 70. It also would produce more income for this hypothetical individual in their 70s, 80s and 90s.
However, investors who want to replicate Levine's strategy will have difficulty producing similar outcomes if they used a variable annuity with average fees. They would also need to fund their retirement between 66 and 70 with another source of income or retirement savings.
If the variable annuity's average annual return fell below 3.5 percent, the person who claimed Social Security at 66 would have a lowered level of payouts than the person who claimed at 70.
Levine's assumptions about indexed universal life policies are aggressive, too.
An expected 6 percent annual return from an indexed universal life policy is "not logical," said Lawrence Rybka, president and CEO of ValMark Securities, an independent broker-dealer in Akron, Ohio, with a large insurance business.
The way indexed universal life policies credit policyholders' accounts for equity returns do not include dividends from stocks, which have historically contributed as much as 35 percent of total returns, Rybka said. That makes achieving the 6 goal harder for policyholders.
"The 6 percent return I use is lower than the 7 percent average rate that most insurance people use to illustrate [an indexed universal life] policy," Levine said.
The point of her research was to compare the benefits of claiming Social Security at full retirement age with claiming at age 70, Levine said. She did not want "to identify the best investment option for a retiree because it is really contingent on the personal attributes of each retiree."
So if you want to juice the Social Security benefits claimed a full retirement age, tread carefully before you follow Levine's strategy. Otherwise, you can always claim Social Security at 70.