Melissa A. Seamon, CFP®
On average, women tend to outlive men, [i] but also generally earn less than men over their lifetime and receive about 20% less than men in Social Security retirement benefits. Therefore, it is essential that women make good choices regarding their Social Security benefits.
Depending on their circumstances, women need the answers to the following five questions about claiming Social Security benefits:
1) I had to leave the workforce early. How does that affect my Social Security benefits?
Time out of the workforce affects your benefits in the following ways:
- Your benefits are calculated using your 35 highest earning years. If you worked less than 35 years, then zeros are included in your benefit calculation. For example, if you worked 30 years then your benefit calculation will be your annual salaries for those 30 years plus five zeros. This will cause your benefit to be lower.
- If you worked more than 35 years, your lowest salary years are dropped from the calculation and replaced with higher earning years. This will cause your benefits to get a boost.
In regard to qualifying for benefits, as long as you earned 40 work credits[ii]—one per quarter or 10 years of work — and paid into Social Security while you worked, you will be eligible for retirement benefits.
If you did not work enough years to earn 40 work credits, you may want to consider if claiming spousal or ex-spousal benefits would be more advantageous.
If you want to maximize your benefits, you can delay them until you reach age 70.
2) What are the rules on collecting Social Security benefits based on my ex-husband’s earnings?[iii]
To collect on your ex-husband’s earnings, you will need his Social Security number or birthdate, place of birth, and the names of his parents to apply. You will also need to meet the following criteria:
- You were married for at least ten years
- You have not remarried
- You are at least 62 years old
If your ex-husband is already 62 but has yet to apply for benefits, you can claim benefits based on his earnings if you are and have been divorced for at least two years.
If your ex-husband is deceased, you can qualify for benefits if
- You were married for at least ten years
- You’re at least 60 years old (50 if you’re disabled)
- Your own benefits are less than what you collect under your ex-husband’s earnings
3) Should I delay claiming benefits until I’m age 70?
That depends on your circumstances. If you’re on your own and have other retirement income sources, you can boost your benefits by 8% per year up to age 70. That amounts to as much as a 32% increase in benefits from your full retirement age (67 if you are born after 1960).[iv]
However, if you are going to rely on Social Security to meet your retirement income needs, you should claim benefits when you need them.
If you’re married, your best option is to coordinate benefits with your spouse. This could be done with the help of a customer service rep at the Social Security Administration and the assistance of your CPA. Prior to seeking advice from either of these, you and your spouse should have an estimate of your annual spending needs.
If the lower-earning spouse qualifies for both her own benefits and spousal benefits, then the Social Security Administration will automatically pay the higher of the two. When you maximize your benefits that way, it can increase your survivor benefits. Widowed spouses are eligible to receive between 71% (at age 60) and 100% (at full retirement age) of their deceased partner’s benefits, depending on the age their spouse started collecting.
4) As a caregiver for aging parents, can I collect their benefits to support them?[v]
Yes. If you are a caregiver supporting aging parents or other relatives who cannot manage their own benefits due to incapacitation, you can be assigned as a representative payee. You can then control the person’s benefits, using them to fund their needs.
5) What happens to my benefits if I die?[vi]
If you leave a family behind, your spouse, children, and other relatives dependent on you may qualify for benefits based on your work record.
Your spouse is eligible for survivor’s benefits if they are
- At least age 60
- At least age 50 and disabled
- Caring for any of your children under age 16 or disabled
Your children can qualify for survivor’s benefits if they are
- Not married
- Age 18 or younger
- Age 19 attending secondary school full time
- At least age 18 and declared severely disabled before age 22
Your parents are eligible for survivor’s benefits if you declared them as dependents (providing at least half their support) on your income taxes.
Work with a Financial Advisor to Optimize Benefits
For many women, their Social Security benefits are integral to their retirement income needs, requiring thoughtful planning to ensure they receive the maximum amount available.
It isn’t always easy to evaluate the best route to take on your own, so you’ll want to work with a financial advisor to better understand how your benefits fit into your retirement plan. Together, you can determine the best timing and approach to claiming your benefits.
If you are in need of a financial advisor who can help you maximize your benefits while working them into your overall financial plan, we’d be happy to meet with you and discuss your options. Simply schedule a call with one of our trusted advisors when you are ready. We best serve clients looking for exceptional client service, who value a long-term partnership, and have a minimum of $500,000 in investable assets.
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