What a difference a year makes. Many people are worried -- if not full-on freaking out -- about whether they can amass enough money for retirement. Some people just aren't saving enough, while others aren't investing well enough. If you're one of these people, fear not. You can dramatically improve your outlook by making a few improvements to your investments, and working just one more year.

Put off starting to collect Social Security by one year, and you'll increase the monthly checks you receive by roughly 8% -- for the rest of your life.

And that's just Social Security. That single year can make a big difference in other ways as well. For starters, you'll earn more money at work. If your $75,000 income allows you to sock away about $10,000 or $15,000 per year for retirement, you'll be able to boost your nest egg by that not-insignificant sum.

A plumper portfolio
Finally, you'll also be able to let your investment portfolio grow for another year. Naturally, as you near and enter retirement, you'll be focusing more on preserving your capital, perhaps adding more bonds for stability. Our team of analysts at Million Dollar Portfolio has that kind of capital-preservation focus. As they say, "... by concentrating on companies with strong balance sheets and solid free cash flow, and buying only when we feel we have a significant margin of safety, we keep our risk of losing money acceptably low."

When looking for investments, seek companies that are both high-quality and priced attractively, giving you some margin of safety. An initial screen with a few choice characteristics can give you a promising field to narrow down further. The following examples sport strong profit margins and returns on equity (both signs of quality), and price-to-cash flow ratios below their five-year averages:


Net Margin


Price-to-Cash Flow

5-Year Avg. Price-to-Cash Flow

Corning (NYSE: GLW) 51% 20% 10.4 13.4
Cliffs Natural Resources (NYSE: CLF) 19% 22% 10.9 17.6
Intel (Nasdaq: INTC) 25% 24% 8.2 10.2
Teva Pharmaceutical 19% 14% 11.6 15.7
Exelon (NYSE: EXC) 14% 20% 4.7 7.7
Stryker (NYSE: SYK) 18% 19% 12.9 19.4

Data: Capital IQ, a division of Standard & Poor's, and Morningstar.

High profit margins suggest that a company offers products or services so unique or well-regarded that they command premium prices from customers. Strong returns on equity reflect companies making effective use of their shareholders' money. Relatively low price-to-cash flow ratios don't guarantee that you're looking at an irresistible bargain, but they do make it more likely that the stock is undervalued.

Many of these stocks have posted strong average long-term returns: 13% for Exelon, 17% for Intel, and 26% for Cliffs Natural Resources, all over the past 20 years. If your investments grow more slowly than that, you can still reap a lot from just an extra year:

Average Annual Growth Rate

Over 20 Years, $10,000 Becomes ...

Over 21 Years, $10,000 Becomes ...

One-Year Difference

8% $46,600 $50,300 $3,700
10% $67,300 $74,000 $6,700
12% $96,500 $108,000 $11,500

Note that I only used a $10,000 starting point above. If you start with $100,000 instead, you'll gain tens of thousands of dollars.

Get paid to wait
Dependable dividend payers can also help you make the most of an extra year before retirement. Their steady payouts will keep rewarding you in good times and bad. Those approaching or in retirement will appreciate the income these stocks generate, while younger investors can plow that dividend income back into more shares. British gas and electric utility National Grid (NYSE: NGG) recently yielded more than 6%. Eli Lilly (NYSE: LLY) occupies another defensive industry, pharmaceuticals, and yields around 5.7%. (Some of the companies in the table above are also strong dividend payers, including Exelon and Intel.)

You can increase your annual retirement income by about 7% for every year that you defer retiring, according to the folks at T. Rowe Price. On top of that, your Social Security payout can rise by 8%, too. And if you've invested effectively, seeking undervalued companies and solid dividend payers, you're likely to be even better off.

If you'd like a little assistance in assembling the perfect portfolio, we're ready to help. Our Million Dollar Portfolio team is investing $1 million of the Fool's own money by choosing the most promising recommendations from our family of investment newsletters. To learn more about Million Dollar Portfolio, simply enter your email address in the box below.