What Women Need to Know About Social Security
Women face some unique obstacles as they enter retirement, the main ones being that they live longer (five to ten years) than men and have to do it with less money. What that means is that women over the age of 65 are 80% more likely to be at the poverty line than men.[i]
The main reasons this occur are pretty straightforward: women still make less than men, traditional “women’s” jobs pay less and provide less pension or retirement savings, and women often have periods where they leave the workforce to care for their family throughout their lifetimes. Women are twice as likely to provide unpaid family care between the ages of 40 and 60. This is a prime working-age for saving, taking advantage of employer matches in 401(k)s and a higher Social Security benefit.[ii]
On top of that, women for health or family reasons, often retire at the minimum age of 62, which locks them into only 80% of their potential Social Security payment. Since over 62% of retired women report that Social Security is their primary source of income[iii] and that the average Social Security check is $1300 a month, it’s not hard to see how challenging it would be to pay for housing, medical care, and regular expenses on under $17,000 a year.
While this data can be sobering, the good news is that with time and education, women need not enter their retirement years in such tenuous financial situations. In this article, we hope to educate and enlighten about Social Security and ideally help you make informed choices that will improve your own, or those you care about, retirement.
Are You Eligible?
Often, we don’t learn much about Social Security until we are knocking on the door, and that puts us at a disservice. The more we understand, earlier, about how Social Security works and who is eligible, the better off we will be. You qualify for Social Security If you worked, over your lifetime, at least ten years and earned a minimum of 40 work credits. An individual work credit, as of 2017, was $1300, so roughly $52,000 of earnings total. If you meet that minimum earning criteria, then you are eligible for Social Security. One may begin collecting their Social Security as early as 62 years of age, but will only get 80% of your potential payout as a penalty for not waiting until 65. If you can postpone collecting Social Security until you are 70, you will receive up to 132% of the value. Whenever you start collecting, you will be locked into that payment, so the longer you can wait to collect, the more money you will receive.
If You’re Married
If both you and your spouse worked and meet the Social Security requirements, then you will both receive your own benefits. If you do not meet the work benefits, you are entitled to one-half of your husband’s Social Security. If you collect before full retirement age and collect your husband's benefit, you may only be eligible for 30% of his benefits payout. In other situations, if you worked and are also eligible for your spouse’s benefits, you will have to choose whichever is larger, as you cannot receive two benefits.
If You’re Divorced
If you were married for at least ten years and are unmarried when you reach the Social Security eligibility age, then you are entitled to some of your ex-spouse’s benefit. This is called an ‘auxiliary beneficiary’ benefit. This payout to you will not affect your ex or their current spouse if they have one.[iv] If your ex-spouse has yet to retire or start collecting Social Security but is over 62, you may be eligible to collect based on their work history.[v]
If You’re Widowed
If your spouse, or ex-spouse, passes away and you are over the age of 60, then you may be eligible for a Widow’s Benefit. Called the Social Security Survivor’s Insurance Program. If you are between 60 and 65, then you may only receive 71% of the benefits. After the age of 66, you may receive 100% of your spouse’s benefits. A widow or widower of any age with a child under 16 is entitled to a 75% payout. As stated above, you are only entitled to one Social Security benefit so you will receive whichever is higher, your or your deceased spouse. If you cohabitate with your spouse at the time of their passing, you may also qualify for a one-time widow payout at that time. [vi]
Having What You Need
A current study shows retiring women will need $147,000 in savings just to cover health care costs.[vii]Understanding what the financial hit women can take entering retirement, can help stop that from being a guarantee. If you are working currently and concerned about your Social Security benefits, you can check online at https://www.ssa.gov/onlineservices/ utilizing their retirement estimator as well as benefit planner to see how much you can expect to receive. Understanding earlier that you will most likely have to do more with less financially can motivate you to get your finances in line. If you do not take full advantage of maxing out contributions to employer-matched 401(k)s and other savings plans, now is the time to do it. Making sure to have a robust emergency fund, attack any debts that may follow you into retirement will also help. Taking the time to crunch the numbers and create a basic minimum budget in retirement will help you understand how much you will need. Seeking a financial advisor to get you on track may also be useful. Being prepared is often the best defense, so the more research you do and the more educated your decisions, the better prepared you will be.
The goal is to retire well and comfortably, for many years.
About the Author
Bob feels strongly that you only retire once leaving no room for mistakes. He is dedicated to building and more importantly preserving investors assets. Bob is a Financial Advisor with Cambridge, an independent broker-dealer, honored to be among the most respected firms in the industry.