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Social Security & Women: Tackling the Challenges

Photo Credit: Chris Olson

With the presidential election on the horizon, Social Security is finding its way into political discussions once again—on campaign trails, news programs, and everyday conversations. It helps to have Hillary Clinton as a candidate, no matter what your views are on her politics. Her presence is great for bringing women’s issues to the forefront, especially those that are affected by Social Security policy.  Of course, the men—Bernie Sanders, Ted Cruz, and even Donald Trump—are chiming in on Social Security too. One reason Social Security is great fodder for debate is because there are definitely some issues when it comes to women’s Social Security benefits.

Social Security benefits are calculated based on qualified lifetime earnings. You take out what you put in. Conceptually that may seem fair, but the gender wage gap drives down benefit amounts for women. And the issue isn’t going away any time soon. In California, Governor Jerry Brown recently signed fair pay legislation to ensure women receive equal pay for equal work, but the income gap remains a reality. A survey by The American Association of University Women recently found that even in 2015, women are still earning 79% of the income earned by their male counterparts. And that report only includes full-time workers. Considering the number of women who leave the workforce—either temporarily or permanently—to serve as caregivers to children and other family members, that earnings discrepancy over a lifetime jumps even higher.

The result: women’s Social Security checks are smaller. According to the Social Security Administration, the average retired woman receives $300 less a month from Social Security than the average man. That’s a huge problem because Social Security is even more important for women. The National Women’s Law Center reports that 30% of women over 65 rely on Social Security for as much as 90% of their monthly income, compared to just 23% of men in the same age group. And because women live longer, by age 85 about two-thirds of Social Security recipients are women. This means women face the compounded problem of 1) living longer and 2) having less income to live on. It’s a bad combination that puts women at a much greater risk of living in poverty in their senior years.

The good news: there are claiming strategies that can help women maximize Social Security benefits to improve their finances throughout their golden years. Understanding what benefits are available, and then leveraging those benefits correctly can maximize your income over the long term. If you’re a woman, here are five eye-openers that can help:

  • Claiming benefits before Full Retirement Age can cost you a bundle.
    Whatever you do, try not to collect any benefits until you at least hit Full Retirement Age (FRA).Spend down your savings. Keep working. Do what it takes to pay the bills between age 63 and your FRA at age 66 or 67 (depending on your birth year). Why? Because between age 62 and FRA, your benefits increase 5% each year. Waiting until FRA also makes you eligible for other claiming strategies such as “file and suspend” and “file and restrict.”

     
  • Waiting until age 70 increases your benefits even more—which is vital for women.
    A woman’s longer life expectancy can be a blessing and a curse. We may get to enjoy more time with our grandkids, but it takes much more retirement income to support our longer lives. Between FRA and age 70, your benefits increase by 8% each year you delay, plus an annual cost of living adjustment. Doing the math, that means that if your monthly benefit at age 62 is $750, waiting to file until your 70th birthday boosts your monthly check to $1,320. That’s quite a birthday present!
     
  • Getting your spouse to wait until age 70 to claim benefits increases your benefits.
    Spousal benefits are based on the other partner’s benefit amount. By waiting until age 70 to claim benefits for the highest earner, both primary and spousal benefits are increased by 8% per year. And if your husband pushes to file earlier, twist his arm on this one. In general, men tend to focus on analysis that points to a breakeven point at age 77, but the goal should be to secure a higher monthly income over the long term—not just breaking even on a lump sum. No matter who is bringing home the bigger paycheck, delaying just four more years can make a huge difference to your joint benefits for years to come.
     
  • You divorce your spouse—not your right to spousal benefits. 
    Many women don’t even realize they can claim spousal benefits, typically equal to about 50% of their partner’s full benefit amount, even if their marriage ends in divorce. As long as your marriage lasted 10 years or more, and you’ve been divorced at least two years, and you are currently unmarried, you may have rights to full spousal benefits (about 50% of your ex-spouses benefit amount) without affecting your ex’s benefits.
     
  • Your ex is worth more dead than alive. 
    Spousal benefits are typically about 50% of your ex-husband’s total benefit amount, while widow’s benefits jump to 100% of that amount. If you’re divorced, are currently unmarried, and your ex is still living, you can receive spousal benefits on his earnings record. And if he dies? You can receive twice that amount in widow’s benefits (this is true even if your ex is remarried and his new spouse is filing her own claim).

We may not be able to change the issues that impact Social Security earnings for women—at least not immediately. But by using the best possible claiming strategies, women can make the most of what’s available to maximize Social Security income and support a long and financially comfortable retirement.


Need help determining the best claiming strategy for your own circumstances? I’m happy to help decipher the rules and create a plan that works for you.


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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >