Optimizing Your Retirement Income

Optimizing your retirement income can ensure that you have income for life.

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Optimizing your retirement income means getting as much as you can from your post-retirement income stream. Optimization starts with a series of questions and answers and ends with a flexible action plan. Nobody knows what the future may hold and there is no single optimization strategy that will work for everyone. There are, however, general guidelines for optimizing retirement income and numerous options to choose from to develop optimization strategies that work for you and set the stage for a comfortable post-retirement life.

Delay Social Security

Delay taking Social Security benefits until you’re at least 65, and if you can, wait until you turn 70. The American Association of Individual Investors says that based on benefit-calculation formulas you can estimate that benefit amounts will increase about 8 percent per year. This increase doesn’t include annual adjustments for inflation so this percentage has the potential to be even higher. Waiting until you’re 65 increases the purchasing power of monthly benefits by about 27 percent and waiting until you’re 70 increases purchasing power by about 88 percent.

Reallocate Assets

Rethink a conservative investment strategy and instead opt for a more moderate strategy that has more potential for growth. The AAII recommends striving for an investment portfolio that has a minimum of 40 percent of assets allocated to stocks and bonds and a maximum of 30 percent in cash or cash equivalents. The logic behind this recommendation is that the more conservative your investment strategy the greater effect rising inflation will have on your retirement income. If your investment strategy is too aggressive, however, you have less time to bounce back from market setbacks and that will also affect your income.


Create a withdrawal strategy designed to ensure you don’t outlive your retirement income. The Retirement Asset Management Corporation says that the consensus among most financial-planning experts is that if you set a withdrawal limit of about 4 percent per year you won’t outlive your money. Another part of your withdrawal strategy should be to prioritize the order in which you will withdraw money from investments and retirement-savings plans. One option to consider is to withdraw money from taxable accounts first and let tax-deferred accounts continue to grow.

Fund an Annuity

Manage your own retirement funds until you turn 70 years of age and then increase the amount you withdraw from a required retirement-plan distribution to purchase income insurance through a fixed annuity. A fixed annuity can ensure you have a steady stream of income for life and some left over for your heirs if that is your objective. Because annuities have no minimum-deposit or withdrawal requirements, you can decide at the time of purchase when to start getting monthly payments and, based on how long you want income insurance to continue, how much to get each month.