In my previous column, I discussed how Social Security benefits can be an important part of a person’s retirement income. Determining what age to claim your Social Security benefits should be determined by age, health, and amount of other savings earmarked to retirement income, among other factors. This is especially important for women planning their retirement.
Some of the reasons are demographic. Women tend to live longer than men, and according to AARP, are more likely than men to be widowed and single when they are older. According to the Department of Health and Human Services, in 2012 only 45 percent of women over 65 years old were married, compared with 75 percent of men.
Another factor to consider is that women tend to take time out of the workforce to care for children or aging parents, and historically have earned less than men, on average. This combination could lead to lower overall career earnings and savings when compared to men of similar age.
Therefore, it’s important for women to ensure they receive the most they’re able from Social Security. Here are some things to keep in mind when making these decisions.
It can pay to delay. Although people can start receiving reduced benefits at age 62, it might be wise to wait until your full retirement age — ages 65 to 67 depending on your birth date — if you’re able to.
If you take Social Security benefits before your full retirement age (FRA), the amount of your monthly benefit payment will be reduced. If you delay collecting benefits beyond your FRA, the amount of your monthly benefit will increase until you reach age 70. Factors such as health and other retirement savings should be considered when deciding what age to claim benefits, so it’s always best to consult a financial advisor before making these permanent decisions.
You can collect Social Security even if you are still working or earning self-employed income — but of course, there are a few rules to remember. If you collect before your full retirement age, your benefits will be decreased by $1 for every $2 you earn over $16,920 (the 2017 limit). The year after you reach full retirement, there is no penalty for working and claiming Social Security at the same time, and your benefits will not be adjusted for earned income. Social Security earnings rules can be very complicated, and again, consulting a financial advisor before making these decisions is recommended.
Social Security may not cover all of your needs in retirement. Historically, Social Security benefits compose half of the total income of unmarried women — including widows — age 65 and older. And according to the same study by the Nationwide Retirement Institute working with a financial advisor helped most women better prepare for their retirement. Only 13 percent of women say they received advice on Social Security from a financial advisor. However, 86 percent of women surveyed — who worked with an advisor — say their Social Security payment was as expected or more than they expected.
Make an informed decision on when to retire. According to the same Nationwide Retirement Institute study, 80 percent of retired women currently collecting Social Security benefits took those benefits early, locking in a lifetime of lower income. That may not be the best financial decision for them longer term. Working a few extra years until FRA could translate into thousands of extra dollars over the course of a person’s retirement. Delaying Social Security benefits until age 70 would mean even more income during the remainder of your life. Consider working longer if you’re able, and consult a professional about your best Social Security claiming strategies.
A careful review of Social Security regulations, your financial situation, and any health considerations you may have are crucial to developing a strategy to maximize income during retirement. Taking the time to review your options and making an informed decision can help you maximize your monthly retirement income and Social Security payments. It can make a dramatic difference in the long run.
Anthony N. Corrao is an independent advisor with Corrao Wealth Management. For more than 25 years, he has helped families with their financial goals by developing financial, educational, and retirement planning strategies. He can be found at www.corra
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