Retirement security more about choices than returns

Q: We have interviewed fee-only certified financial planners, but even they focus primarily on managing money. I am 68; my wife is 65. We were both involuntarily retired years ago.

Our lifestyle is modest. We try to be frugal (no dining out, no movies, no vacations). Our cost of living in the Seattle area is $70,000. Real estate taxes and insurance are outrageous. We have been supplementing our $61,500 income with a line of credit and IRA withdrawals. Not exactly the retirement we imagined, given my pension, my Social Security, our debt-free $600,000 home, investments of $1 million and life insurance policies on each other's life.

When my wife takes Social Security and I need to take IRA required minimum withdrawals, our income will be nearly $100,000. My wife thinks that will be sufficient and that I'm too cautious. I fear that spending any withdrawals will jeopardize my wife's future.

Our concerns:

1. When should my wife file for Social Security?

2. Will she be financially secure on her own?

3. Should we keep our life insurance policies?

4. How do we cope with the rising cost of living, paying down debt, increased home maintenance costs, higher income taxes and saving for her future as a widow?

Our basic concern is this: Can we afford to stay in Washington and

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and improve our standard of living?

As a last resort, we are considering moving to Arizona. A new house would cost less than $300,000 and the cost of living would drop to $50,000. A nudge in the right direction would be greatly appreciated. - D.D., by email

A: Your instinct is correct. You can do more with decisions and arrangements than with asset management. So here are some suggestions:

• Your wife will benefit by delaying her Social Security benefits. Every year of delay will increase this safe, inflation-adjusted benefit by 8 percent. No safe investment will do that.

• Your future is not endangered if she dies. You'd get the larger Social Security benefit, which would be hers. So there is no reason for her to maintain a life insurance policy. The cash value and premium savings can help her defer taking Social Security benefits.

• Her future is endangered if you die due to the loss of your pension. It's a large part of your income as a couple. So you need to keep your life insurance policy. It will partially offset the loss of your pension.

• If you draw from your $1 million in investments at $40,000 a year, you'll have a joint income of $100,000, even while she is deferring taking benefits. So she's right about relaxing a bit about spending.

Finally, the biggest single lever on your standard of living, as always, is shelter expense. If you downsized from a $600,000 home to a $300,000 home, the liberated equity would earn enough, invested, to pay virtually all of the operating expenses for the new house. Depending on where you move, it might not be a downsizing, given the cost of housing in Seattle. In any case, the move could mean a net change in spending power of at least $24,000 a year - more, if you move to a no-income-tax state like Texas or Florida.

If you start from a sense of embattlement, you won't see the opportunity ahead: You have more freedom to make choices than you've had in most of your pre-retirement life. Now is the time to make a plan and make the most of it.

Q: I am 79 and my car is 14. Would it be financially wise to lease a car rather than buying one since it is not likely that I will be driving for another 14 years? - J.B., by email

A: Hey! You're not dead yet. There may be more than one car in your future. In any case, it's a very good bet that there would be more than one car lease in your future.

If you check the life expectancy of a 79-year-old male as calculated by Social Security actuaries, you'll find that life expectancy is 8.66 years. Life expectancy doesn't mean you'll fall down and die at 87 years 8 months. It means that you have a 50 percent chance of living longer. That could be translated into four 24-month leases or more than two 36-month leases.

So unless you really enjoy visiting car dealerships and repeating an experience that can be traumatic, annoying or long enough to read "War and Peace," I suggest that you pick a car you like, buy it and keep it. With any luck, you'll drive it and love it until the day they won't let you drive anymore.

• Scott Burns is a principal of the Plano, Texas-based investment firm AssetBuilder Inc., a registered investment adviser. Questions about personal finance and investments may be sent by email to scott@scottburns.com.

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