Spend savings or take Social Security?

In general, it's better to spend savings and delay taking Social Security. True, that's not the best plan if you're both likely to die before age 78. But the average 65-year-old now lives into his or her 80s, and many live longer. Indeed, a 65-year-old couple face a 50 percent chance that one spouse will reach 92.

Social Security income lasts both your lifetimes -- and delaying your application doesn't just give you a bigger initial benefit. It also dramatically increases your income in old age because you receive yearly inflation increases on a larger amount. Let's say John starts Social Security at 62, with a $1,546 monthly benefit. At 85, he'll get $2,822 a month thanks to projected inflation adjustments. But if he delays Social Security until 66, he'll boost his initial benefit by $728 to $2,274 a month -- and when he's 85, it'll be $3,843. (You can compare your own numbers online using the Social Security Administration calculator at 1.usa.gov/1baWHvb.)

Let's say John must take $1,500 a month from savings to postpone Social Security until he's 66. He'll be paying $72,000 ($1,500 x 48 months) for an extra $728 of inflation-adjusted lifetime income for two. That's a bargain. A commercial annuity paying $728 a month for two lives would cost him $158,000 -- and its payments wouldn't be inflation-adjusted.