Women’s History Month Provides Opportunity for Women to Create Financial Plans
March is Women’s History Month and it’s a great time to reflect on some of the challenges our clients have faced when planning for retirement. This article will explore the particular challenges women face when planning for retirement in relation to Social Security.
The challenges are straightforward—women live longer than men, are more likely to take time out of the workforce to care for children, and are called on to take care of aging parents. This often leaves them with fewer years to save for retirement and fewer sources of retirement income. As a result, women are more likely to experience financial insecurity in retirement than men.
Social Security is the first line of securing retirement income. Women have long been at a disadvantage when it comes to Social Security benefits. Although women are now more likely to work and earn income throughout their lives, unique challenges exist when it comes to using Social Security to fund their retirement. Unfortunately, because of a pay gap, women often receive lower Social Security that is directly related to their lower incomes, longer life expectancies, and caregiving responsibilities. So, how can we maximize your Social Security? Here are a few tactics we will explore:
- Delay claiming Social Security benefits until age 70
- Understand the spousal benefit
- Work for at least 35 years
- Consider other retirement income sources
Delay claiming Social Security benefits until age 70: By delaying taking Social Security benefits until age 70, women can increase their monthly benefits by 8% for each year they wait. A recent AARP study found that “delaying Social Security can be framed as longevity insurance that helps to support the increasing costs associated with living a long life. It provides inflation-adjusted lifetime benefits…These monthly benefits will be 77% larger in inflation-adjusted terms for those who claim at 70 instead of at 62,” the study said.
Understand the spousal benefit: Women who are married may be eligible to receive up to half of their spouses’ Social Security benefit. This is known as the spousal benefit and is based on the earnings record of a woman’s spouse. Women should be aware that their own benefit may be larger than their spousal benefit, so it’s important to understand the difference and make the best decision for their individual situation.
Work for at least 35 years: Women should strive to work for at least 35 years to maximize their Social Security benefit. This is because Social Security benefits are determined by a person’s average indexed monthly earnings over their 35 highest-earning years. Working for fewer than 35 years will result in a lower benefit amount.
Consider other retirement income sources: Social Security benefits are only one part of a comprehensive retirement plan. Women should also consider other sources of retirement income, such as pensions, annuities, and investments. This will help to create an income stream that is diversified, secure, and that can last throughout retirement.
How does marriage for divorced or widowed women factor into Social Security?
Divorced or widowed women may also be eligible for Social Security benefits, depending on their marital history. In the case of a divorce, the ex-spouse must have been married to the person for at least 10 years in order to receive Social Security benefits based on their earnings record. Widows can receive Social Security benefits based on their late spouses’ earnings record if they were married for at least nine months. In both cases, the amount of the benefit is based on the earnings record of the ex-spouse or late spouse.