There are many types of retirement income generators (RIGs) that each produce different amounts of retirement income. My Retirement Income Scorecard compares the amounts of retirement income that are possible for 10 different RIGs, which is one consideration for choosing a RIG or combination of RIGs to build your retirement income portfolio.
This post describes details about the different RIGs analyzed in the Retirement Income Scorecard.
Social Security bridge payment
Most people can maximize their Social Security income if they delay starting their Social Security benefits for as long as possible but no later than age 70. If you retire before the date at which you’ve decided to start your Social Security benefits, you can use a portion of your retirement savings as a temporary substitute for the estimated income you’ll get from Social Security once you start getting benefits. This strategy is called a “Social Security bridge payment.”
The $5,892 amount shown in Figure 1 of the Retirement Income Scorecard is an estimate of the additional retirement income a 65-year-old couple can generate if they use $100,000 of their retirement savings to fund a Social Security bridge payment until age 70 (the age at which they plan to start their Social Security benefits), compared to starting Social Security at age 65. (For more details regarding the Social Security bridge strategy, this particular example, and exactly how I estimated the $5,892 amount, see my prior post below.)
It’s important to understand that the amount of additional income that a Social Security bridge payment can generate highly depends on a retiree’s specific circumstances. Nevertheless, the estimate for this hypothetical couple is representative of the potential income that such a strategy can generate.
Guaranteed lifetime annuities
You can invest a portion of your retirement savings with an insurance company that will then guarantee to pay you a monthly retirement income for the rest of your life, no matter how long you live. You can choose to continue the income to your spouse or partner with a joint and survivor annuity.
The Retirement Income Scorecard includes these three annuities:
- A “single premium immediate annuity (SPIA)” with a fixed dollar amount and 100% joint and survivor coverage
- A SPIA that increases the income at an annual rate of 3% per year, with 100% joint and survivor coverage
- A VA/GLWB annuity, which stands for “variable annuity with guaranteed lifetime withdrawal benefit”
One important feature of a SPIA is that once you give your money to an insurance company, you can’t change your mind and withdraw any…