How I Boosted My Social Security Benefit by $100,000

If you are like most people facing the prospect of retirement, you are probably figuring out how to generate enough income for retirement that it will last as long as you need it to.  This article will talk about two of the biggest strategies you have for generating retirement income: when and how you should claim Social Security benefits and how to use your home equity as retirement income insurance. How important are these two strategies?

• Social Security: For older Americans, approximately 45% of unmarried people rely on Social Security for 90% or more of their income, according to the Social Security Administration. For married couples, this number is 21%.
• Your Home Equity: According to the National Association of Home Builders, in 2016, the primary residence represents one-quarter of all assets by households, surpassing other financial assets, business interests, and retirement accounts.

Boost Your Income with Social Security

It’s worth thinking hard about when and how to take Social Security because it has some unique benefits that aren’t offered by any other retirement solution:

• It offers lifetime income that is adjusted for inflation. (You can’t buy an annuity that is guaranteed to keep pace with inflation.)
• The cost is approximately 30% to 40% less than you could get buying an annuity from an insurance company.
• It’s backed by the U.S. Government and taxpayers, so it has very little risk.

There are two primary strategies for getting the most out of Social Security:

Timing

The first strategy is to optimize when you claim the benefit. I forecast my own Social Security numbers and this is what I came up with:

Social Security Start Age	Monthly Benefit	Benefit Increase
62	$1,776	NA
67 (Full Retirement Age)	$2,542	$766 or 43% more than age 62
70 (Maximum Claim Age)	$3,161	$1,385 or 78% more than age 62

For almost everyone it pays to wait until your full retirement age – whether you wait until your maximum claim age depends on if you think you’ll live longer than 80 years old.  Use this Social Security Calculator to figure out the best time for you to start your benefits.

So How Does This Add Up to $100,000 in Additional Income for Me?

If I file and suspend at my full retirement age so that my spouse can claim a spousal benefit starting at age 67, she gets a bonus of approximately $1,800 per month for thee years worth. This equals approximately $65,000.  This allows both of our Social Security Benefits to continue growing as if we had not claimed anything until our Maximum Retirement Age of 70.  If we then both claim our maximum Social Security Benefit at 70 and then live until our mid to late 80s we pretty quickly get to over $100,000 in total additional Social Security benefit. You get a pretty big lift if you can maximize your benefit and you are lucky enough to live a long time.

Boost Income with Home Equity

The second big strategy that homeowners have to insure their retirement is to explore leveraging their home equity as part of their overall retirement plan. This is not a common strategy: actively including your home equity as part of your retirement plan. This despite the fact that, for most homeowners, their home equity is their biggest asset. By planning ahead consumers can set up a line of credit that grows over time. They can tap into it if necessary, but they won’t pay interest on if they don’t use it.  Here are some of the key benefits to this strategy:

• Lock in your home equity and hedge interest rates
• In a Down Stock Market, Tap Equity Instead of Savings
• Grow and Protect Your Home Equity in a Predictable Way
• Just Wait and Tap the Equity if You Need it as You Age

Learn more about this strategy in this detailed article: How to Use Home Equity to Insure Your Retirement. By thinking through these strategies and taking action now to implement a plan – consumers can materially improve their chances of maintaining their quality of life in retirement.