Last year, women made up 57% of the Social Security beneficiaries over the age of 62 and 68% of beneficiaries over the age of 85. Why is it important to know these figures? Women are most likely to take time out of the work force to care for children or parents. Historically, many women also earn less than men. Those two factors mean that their overall career earnings and savings may be lower, hence lowering their Social Security retirement benefit payout.
TO DELAY OR NOT TO DELAY
Early retirement can begin at 62, regardless of the year you were born. Those women taking early benefits will receive them at a reduced rate. Full retirement age (FRA), however, depending on your birth year, is between ages 65 and 67. If you delay receiving benefits past your FRA, the amount of your monthly benefit will increase for each month you delay until you reach age 70.
To help determine when to begin receiving benefits, consider the longevity of the women in your family, what your current needs are monthly, and what other income sources you may have to offset your benefit payment. Another important factor to consider is the age of your husband. Historically, women live longer than men. Keeping this in mind, your husband has to also think about your benefits. For example, let us look at a wife, age 62 and a husband age 64. We will assume the men in the husband’s family pass at an average age of 74. Let’s also assume he earned more in his working years than she did. Her spousal benefit would be the greater of hers or 50% of his benefits.
RECEIVING BENEFITS WHILE WORKING
If a husband dies young leaving a woman with a cash flow shortage, most women find themselves working, in some capacity to offset that loss of income. Receiving Social Security benefits before FRA while earning an income isn’t prohibited, but benefits may be reduced depending on the woman’s income. 2015 gross earnings cannot be above $15,720 without reducing those benefits if receiving them before FRA. If income exceeds that threshold, benefits are reduced by $1 for every $2 earned over $15,720. In the year in which FRA is reached, $1 is deducted for every $3 earned above $41,880 (the limit in 2015). Once FRA is reached, there is no penalty for working and claiming Social Security at the same time. The positive aspect of earning an income while receiving Social Security benefits is that women may still have the ability to build their investments and savings pile. One caveat to this example is that a widow has the ability to receive reduced benefits at age 60 rather than age 62 using the survivor option. FRA benefits, however, would be lost.
THE NUMBERS DO NOT LIE
The average woman over age 65 receiving Social Security benefits receives $12,520 annually compared to $16,398 for men of the same age group. Women also make up 50% of the spousal benefit option recipients whereas men only make up 35% of that payout option. Finally, almost 50% of women receiving Social Security benefits rely on it for over 90% of their overall income.
Take the time to sit down with your spouse and an advisor to determine which option best fits your current cash flow needs and expenses. A trusted fiduciary will review all available options to come up with the best solution for you.
Source: Fidelity Investment, Office of Social Security
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