There are several things to consider here. First, there is no automatic way to do this. You'll have to experiment and see how you can fill your "income gap" during those years as well as see which options are more tax efficient over your lifetime Unfortunately, spousal Social Security benefits will no longer be an option for you given this week's new budget law (unless somehow it is reversed).

The key is to research and experiment with methods to bridge the “income gap” between the end of your working years to your Social Security start date. Since each person's situation is different, unfortunately there are many different ways to accomplish this and alleviate some of the liquidity/income constraints.

Depending on your specific situation, there may be a number of income and/or asset sources which can be used to fill the “gap”. Of course, reducing expenses helps as well.

Here are some general ideas:

• If married (now or previously), can you start spousal Social Security during this time? This won't work for you, but may for others.
• Do you have a pension or annuity that can start earlier (during the gap years)? Since Social Security grows at 8% / year (from FRA to age 70) it's typically better to delay Social Security.
• Some people might consider downsizing to free up home equity
• Reduce expenses in earlier years / save aggressively
• Paying off mortgage and/or eliminating other debts before retiring. Reduced spending leads to fewer demands on financial assets. Would you consider a reverse mortgage to free up equity?
• Potentially reducing retirement contributions for a while to increase liquid assets
• Depending on your age and unique situation, it may make sense to increase (or decrease) retirement contributions of various types (e.g. traditional IRA, 401(k), Roth IRA, regular asset mutual funds, etc.)
• Consider working 1 more year or part time to build assets and delay / reduce withdrawals. Depending on your situation, even a small amount of earned income can make a difference.
• Do you have sufficient assets to spend down, in part, to fill the remaining “gap” years? If so, try to do this without moving to a higher tax bracket. It’s typically preferable to not spend down all assets so you have some reserves to spend as your choose and to maintain a margin of safety.
• If you can become more “tax efficient” over your lifetime, this may free up some assets
• Consider converting some assets to annuities
• If you have multiple options, can you sequence them to raise your overall consumption?

Based on the relevance of the above ideas to your situation, you may have gone a long way towards bridging the gap. Make a list of all your relevant assets and income sources that could be applied in your “gap” years including the amounts, if they have cost of living increases, etc. Once you have a solid "map" created to fill your income "gap" years to the extent possible, then you can make tweaks to optimize the results.

While taxes are a part of this, other factors can outweigh their importance in your lifetime consumption.

Best,
Brian

That's a great list Brian.

I think Brian would agree with me--I believe this is what he's suggesting in his last sentence--that "better tax consequences" should not be and end in itself. If you pay more taxes, but in doing so you have a higher or more agreeable discretionary spending pattern, then by all means do it.

For example, I was working with someone a few weeks ago that was somewhat liquidity constrained because of his (wise) insistence that he delay SS to age 70. He did end up using some special withdrawals in the early years to bridge the gap, but he also soon discovered that if he took his ROTH first rather than last (which would allow all the earnings to accumulate tax free longer and thus be "tax smart") that he could go ahead and "cash in" on his tax free income in the gap when it really mattered to him rather than between the ages of 95-100 when it didn't matter to him so much (even though it meant forgoing the tax advantage).

Bringing that ROTH to the front end, in defiance of conventional wisdom, produced a much happier discretionary spending pattern for him.

I don't know if that all makes sense, but perhaps you get the general principle.

Drawing from the ROTH first also works better for me to fill the gap. Another advantage is this money isn't added to your taxable income (provided you are older than 59 1/2 and the ROTH is 5 years old) so if you want to do a Traditional to ROTH partial conversion without crossing into a higher tax bracket (if you have room to do that in your bracket), the ROTH withdrawal amount won't increase income (unlike the conversion amount). The conversion will increase taxes in the year of conversion, but it can serve to replenish the ROTH and reduce taxes in the future if your income goes into a higher tax bracket when you start collecting social security and/or pensions. You can usually transfer securities "in-kind" so you don't have to sell them if you don't want to). This is my understanding and the strategy I am currently planning for.