How to Maximize Your Retirement Benefits

Retirement is fixed monthly income and knowing how to maximize your dollars will benefit you in retirement.

A lifetime of planning and saving has left a large nest egg ready and waiting for retirement. Now that the time to retire has arrived, the question of the best use arises. How can you maximize your benefits? What is the best way to produce the cash flow you will need for the rest of your life? Asset allocation strategies have changed in the post-recession economy. The number and nature of investments that are recommended has also shifted. You must know how to maximize your retirement benefits to better benefit you financially in your older years.

Instructions

1. Take full advantage of Social Security. Use a little-known strategy to boost your Social Security benefits in retirement. File for your benefits so your spouse or dependent children can start collecting their share. After doing this, immediately suspend your own benefits. This may seem strange, but delaying your own benefits can increase them by 8 percent each year. Your household income will go up, and you can collect higher monthly benefits at a later age. The caveat is that you must be at the full retirement age for this strategy to work.

2. Allocate assets wisely. Invest your savings using an asset allocation model designed to provide safe, consistent returns. Traditionally, this consists of bonds and savings. Bonds provide guaranteed interest income. Creating a bond ladder with multiple maturities provides consistent cash flow all year long. A low interest rate environment lowers the returns that you can expect. Chasing high yields through "junk bonds" is extremely inappropriate for retirees. Stick to dividend-paying stocks to balance out the portfolio. Maintaining adequate cash flow is paramount.

3. Use income carefully. Cut expenses wherever possible to maximize the purchasing power of your income. It may be a good idea to still save some money each month to prepare for volatility in your various assets and unplanned expenses. For retirees, cash is king. Maintaining or even increasing your income level in retirement should be your primary focus. Keep reinvesting the principal from matured bonds in new bonds. Take advantage of high-yield money market accounts for your savings and extra cash.

References

• "Kiplinger's Personal Finance"; Secrets to Maximizing Social Security; Mary Beth Franklin; August 5, 2010