Today, in part two of the managing liquidity series, we’re going to talk about maintaining liquidity with
annuities and Social Security maximization. Both of these tools offer important ways of preserving your
retirement income and providing a hedge against sequence of returns risk.
1. Maximizing Social Security: One of the best ways to maximize your Social Security payment is to
wait as long as possible to take it. You can gain as much as 132 percent of your quoted monthly
benefit by waiting until age 70 to trigger the income. You can also look into filing a restricted
application to take 50 percent of your spouse’s benefit, assuming theirs is larger than yours.
Note that triggering this benefit will be considered the same as taking your own, so you want to
make sure you wait as long as possible to do so.
2. Annuities: Annuities can offer one of the best ways of fighting sequence of returns risk. With the
right annuity, you can secure a lifetime income regardless of how the market performs. Not only
does this hedge against sequence of returns risk, but it also means you can go through
retirement without worrying about how you’re going to make your savings last.
While maintaining liquidity in your retirement accounts will help reduce the damage done by sequence
of returns risk, that’s not the only reason to try and keep up the cash flow. Seniors who are concerned
about ensuring that their retirement savings last also need to try to maintain liquidity. When your
various investments return an income that you can live on, it means you won’t tap into your principal,
which will give you the assurance you need that your savings is going to make it over the long haul.