Social Security Benefits for Women: Avoid Making a Big Mistake

Social Security Benefits for Women: Avoid Making a Big Mistake

For many women, Social Security benefits are not nearly what they could be. Too many women are making a big mistake by claiming early.

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Why are women’s Social Security benefits typically lower than men’s?

There are a few issues.

Women tend to start Social Security earlier than men — lowering their monthly paycheck. The longer you wait to start your benefits, the higher your monthly paycheck will be.

Another problem is that women have often spent fewer years in the work force and are more apt to have worked part time for a period of time. Why? Children! Many women take time off to raise children meaning that they have fewer years in the workforce and Social Security is based on your indexed monthly earnings during the 35 years in which you earned the most.

In fact, the lifetime earnings of mothers with one child are 28 percent less than the earnings of childless women, all else equal, and each additional child lowers lifetime earnings by another 3 percent.

Why is it important for women to wait to start benefits?

Women live significantly longer than their male counterparts.

The longer you are likely to live, the more important it is to delay starting Social Security so that you boost your lifetime payout.

The average benefit for someone starting at age 62 is $1,130. If you were to live to age 85, you would have earned around $312,000. (And, if you were to live till 90, you would earn $380,000 over your lifetime.)

Now, let’s compare starting benefits at age 66. The average monthly benefit at that age is $1,489. That adds up to a lifetime benefit amount of $339,500 if you live to age 85. (And, if you were to live till 90, it would mean a total of $429,000.)

So, waiting to start benefits means —  on average — an additional $27,500 if you live till age 85 or $49,000 if you live till 90.

Women Live Longer than Men

A woman turning age 65 today can expect to live, on average, until age 86.6, whereas a man turning 65 today can expect to live, on average, until age 84.3. And, one in four women reaches the age of 92.

Of the women aged 50 or older who are either already retired or plan to retire in the next 10 years, only 29 percent say life is better than before retirement and 28 percent say life is worse, according to the survey. For those who say it’s worse, most say it’s due to lack of income in retirement and higher than expected cost of living expenses.

Life expectancy comes into play when deciding when to take Social Security benefits. It’s not just as simple as what works for today, but what is going to work in the long term.

Since Social Security benefits are based on average earnings over the best 35 years of a career, women are often penalized for leaving the workforce to raise children or care for a parent, the survey says.

Some women have to retire early to care for an elderly parent who has no long-term care coverage. Women caregivers are two-and-a-half times more likely to end up in poverty and five times more likely to depend primarily on Social Security for income.

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