How to pump up retirement income by as much as 30%

When you retire, you want to live like this guy.

Worried you wont have enough for a comfortable retirement? If youre willing to spend down your assets, as well as take a few other steps, you could boost your annual income by perhaps 30%.

Imagine a couple, both 62 years old. Well keep things simple and assume theres just one breadwinnerand well be politically incorrect and assume its the husband. They claim Social Security right away, even though they cant receive full benefits for another four years. He qualifies for $15,000 a year and his wife is eligible for spousal benefits worth $7,000.

Meanwhile, they own a $300,000 home with no mortgage and have $500,000 in savings. If they use the 4% portfolio withdrawal rate thats often recommended by financial planners, that $500,000 would generate $20,000 in first-year retirement income, with withdrawals rising in subsequent years along with inflation.

Add that to their Social Security and our hypothetical couple would have $42,000 a year. Heres how they could do better.

Paying to delay

Instead of claiming benefits at age 62, the husband files for Social Security at 66which is his full Social Security retirement agebut immediately suspends his benefit. This maneuver allows his wife to claim spousal benefits, which would be worth $10,000 a year, thanks to the four-year delay. Theres no point in postponing spousal benefits beyond full retirement age, because you dont get any further credit for delaying.

Meanwhile, the husband claims Social Security at age 70, the latest possible age. Because of the delay, he receives $26,400 a year, while also guaranteeing a larger survivor benefit for his wife, assuming he predeceases her.

The best annuity you can buy is Social Security, argues Baylor University investments professor William Reichenstein. The higher-income earner should delay benefits unless theyre both in poor health, because his benefit will be paid until the second spouse dies.

At age 70, our couple would have $36,400 in combined Social Security income. This figure is in todays dollars and ignores any intervening inflation-driven increases in Social Security benefits. To keep things simple, well also assume that their portfolios return rivals the inflation rate.

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How to pump up retirement income by as much as 30%