Social Security benefits are a popular topic of discussion — will they be available? What percentage? How long? For whom?
What is sometimes not discussed as it relates to Social Security, however, are the differences between men and women. Women might not fully understand how the decisions they make about Social Security could have negative consequences when it comes to their long-term financial security. Women represent more than half of all Social Security beneficiaries age 62 and older and nearly two-thirds of all beneficiaries over the age of 85, presenting a greater need for understanding.1
Regardless of age, creating awareness among women is key to maximizing their Social Security benefits and building sound financial strategies for retirement. Help guide them through these aspects of Social Security and how they could affect their financial futures if not properly addressed.
1. Women should aim for full retirement age (FRA) when filing for benefits
Advisors often tout the importance of waiting as long as possible to claim Social Security in order to receive the maximum benefit. Women, however, will likely still receive fewer benefits compared to men due to lower lifetime earnings, making delaying benefits until FRA even more critical. In fact, 42% of elderly women rely on Social Security benefits for half or more of their income, compared to 37% of men.2
Claiming at the minimum eligibility age of 62 instead of waiting until full benefits are available could result in a 30% reduction in benefits!3 Ensure that your female clients are fully informed about the financial implications of claiming benefits early.
2. Married women born before January 2, 1954, may be able to collect a spousal benefit
A woman who qualifies based on her date of birth can choose to receive only her spouse's benefit and delay receiving her own retirement benefit until a later date. For those born after January 2, 1954, however, the option to receive only one benefit no longer exists. If she applies for one, she’s effectively filing for all retirement or spousal benefits and cannot delay claiming the other.4
3. Divorced women may qualify for spousal benefits
For divorced women who are age 62 and older and are unmarried, a spousal benefit equivalent up to half of the ex-spouse’s FRA Social Security benefit may be available. That’s even if the ex-spouse remarried. If your client is eligible for benefits on her own record, Social Security will pay that amount first and, if the ex-spouse’s benefit is higher, Social Security will pay the difference so that her combined benefits equal the higher amount. The benefits a divorced spouse gets have no effect on the amount the ex-spouse may receive.4
4. Widowed women have a choice in benefits
Surviving spouses can choose to collect Social Security benefits based on their own earnings record once they become eligible, or opt to collect a survivor benefit. Rather than waiting until age 62, however, widows can begin receiving survivor benefits as early as age 60. If they’re disabled, the eligibility age drops to 50, and if they care for a child of the deceased spouse who’s younger than 16 or disabled, there is no age limit. A widow can then switch to her own retirement benefit as early as age 62 or delay switching to leverage the increase for each year they postpone collection beyond FRA.5
5. Women may pay the price for longevity
On average, women who reach age 62 will live another 23 years compared to men at age 62 who can expect to live about 20 years longer.6 Greater longevity for women translates to additional expenses, not the least of which is healthcare. In 2021, the average person over age 65 spent more than $7,000 on healthcare ($585 per month). Carried out over 23 years, that’s $161,000 that will need to be covered, and that’s if healthcare costs stay the same.7 We all know the likelihood of that. Covering this exponentially increasing cost alone is a persuasive argument for women to delay collecting Social Security benefits as long as possible.
Having a handle on the risks and rewards of managing Social Security benefits can help your female clients make more strategic decisions about their retirement. Help them maximize all aspects of their finances with CUNA Mutual Group risk control annuities, and the advice found in our Elevate Advanced PlanningTM library. Click below to access these valuable resources now.