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As a childless single woman, Karen Callahan amasses the financial pieces that will protect her for a potentially long life on her own. A big piece of her puzzle: getting as much Social Security income as possible.
Ms. Callahan, 67, of Marlborough, Massachusetts, defers claiming her benefits until she is 70, when she will be eligible for $3,100 a month. She said that if she claims today, her benefit will be permanently reduced to about $2,500.
The income from the web design company she owns will cover her expenses until age 70, including the $375 per month apartment fee in her home. In excellent health and able to bench press 120 pounds, Ms. Callahan expects to live long enough to gain more of her lifelong benefits by waiting rather than demanding less for much longer.
“The bells of hell,” she said, “I put the money, and I will go to the extreme.”
For many older singles, as well as divorcees and widows, getting the most out of Social Security is critical, experts say. Women tend to live longer than men, and rely more on Social Security as their primary source of retirement income. Their benefits are, on average, also lower, due in part to a loss of income or part-time work during the years of caring for children and older relatives.
said Marcia Mantell, a retirement counselor in Plymouth, Massachusetts, and author of What’s the Deal with Women’s Social Security? Despite this, many women leave large amounts of this guaranteed source of inflation-adjusted money on the table.
“This safety net is very important in old age,” she said. “However, most women do not fully understand how to maximize this benefit.”
Ms Mantell said younger women with years ahead of them could start maximizing the benefits, by looking for jobs with more money and asking for raises, which “results in higher compensation tomorrow”.
To get started hacking into the swamp, it’s helpful to know the basics. The main concept is known as full retirement age – when an individual is entitled to full benefits based on his earnings. Anyone born between 1943 and 1954 can claim full retirement benefits when they turn 66. The full retirement age gradually increases to 67 for those born in 1960 or later.
The earliest a person can claim is 62, but the benefit will be permanently reduced by a certain percentage for each month requested by the beneficiary before full retirement age is reached. For example, a woman who reaches full retirement age of 67 will receive 70 percent of her full benefit by claiming age 62.
Each year, the beneficiary defers his claim between full retirement age and 70, and the benefit increases by 8 percent; This is known as a delayed retirement credit.
For couples, including same-sex couples, a low-income spouse can claim “marital” benefits on her partner’s work history at 62, but only if the other partner starts collecting. At full retirement age, a lower-income earner can receive a spousal benefit of 50 percent of the full retirement benefit for higher earners.
A potential beneficiary can go online to check her Social Security statement, which shows her annual earnings history and provides estimates, based on that record, of how much she’ll make at full retirement age, by claiming at age 62 or waiting until 70.
If you are single
Experts say that a single woman, whether she has never married or whose marriage lasted a short time, should postpone claiming benefits as long as possible.
Suppose that at the age of sixty-seven, a woman is entitled to a monthly bonus of $2,000. If she claims to be 62, she will receive $1,400. If she waited until age 70, her benefit would be $2,480 — a 77 percent increase in lifetime monthly income.
“For single women, longevity is the biggest risk for them,” Ms Mantell said. “Even waiting an extra year after she reaches full retirement age will bring her another 8 percent in benefits.”
Unless one dies relatively early, a person is more likely to reach the age at which the total lifetime benefits of the delay exceed the total lifetime benefits of claiming smaller benefits earlier, according to research by William Reichenstein and William Mayer. They’re Essential to Social Security Solutions, a company that uses pioneering software to help individuals and couples maximize life’s benefits.
This possibility is especially the case for women. In 2019, the life expectancy of a 65-year-old American woman was 85.8 years, according to the US Administration on Aging.
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“Unless a single woman’s life expectancy is shorter than average, she can maximize her benefits by waiting until age 70,” said Dr. Richenstein, professor emeritus of investments at Baylor University.
A single woman may also be able to increase her benefits by delaying retirement. The Social Security Administration calculates monthly benefits by examining the 35 years of the highest wages for a beneficiary. Even part-time work can replace any “zeroes” of years of caregiving.
Ms. Callahan said she expects that her income from working longer will replace the lower income years when she started her work as well as the years she was a teacher and did not pay into the Social Security system, instead receiving retirement compensation. (Social Security does not cover public employees in about a dozen states.)
Women who lost their jobs, perhaps during the pandemic, and who claimed benefits were cut early have a chance of rolling back. One option is to “suspend” their benefits when they reach full retirement age and restart them later, possibly at age 70.
“Delayed retirement credits mostly offset the reduced payments from the early claim,” said Ms. Mantell.
If you are divorced
Women generally do worse financially than men after a divorce, but an ex-wife may be able to mitigate the damage by claiming a spouse or heirs allowance on her ex-husband’s work history.
“Many women who have spent years caring for their children are divorcing after decades of marriage,” said Michelle Petrovsky, a certified financial planner in Scottsdale, Arizona who specializes in divorce matters. “They haven’t had the opportunity to earn income or give out a 401(k), and they’re counting on that advantage.”
In order for a divorcee to qualify for a spouse benefit, both spouses must be at least 62 years old and the marriage must have lasted 10 years or more. Unlike a married woman, a divorced woman can claim even if her ex-husband has not applied for benefits.
A divorced woman who is waiting until full retirement age can claim a husband’s allowance of 50 percent of the full benefit of her ex-husband. The provision is reduced by a certain percentage for each month you collect before then.
This higher advantage can add up to a large retirement fund for a woman whose marriage may have ended decades ago.
Dr. Reichenstein said, Suppose a woman her ex-husband charges in full is $2,400. Her benefit at full retirement age is probably $800. If she applied for a spousal benefit at age 67, she would receive $1,200 a month, accruing $259,200 by age 85. If she claims she is 62, her monthly benefit will be $830—$30,000 less than Age 85 years old.
A woman who has two or more former spouses and has been married to them for 10 years can choose the higher marital benefit. And if one of the ex-spouses dies, she can switch to the allowances for larger heirs. An ex-wife loses marital benefit once she gets married.
The ex-husband is not notified when his ex-wife applies for benefits recorded in his registry. His entitlement will not be reduced, nor will any marital benefit to his current spouse be reduced.
If you are a widow
Nearly 32 percent of all widows who received Social Security “survivor” benefits in 2018 were between the ages of 60 and 70, according to the Social Security Administration.
Promoting the “benefit” for widows in this younger cohort is essential, said Laura Mattia, certified financial planner with Atlas Fiduciary Financial in Sarasota, Florida. “A widow can live for another 30 years and must be financially responsible for herself,” she said.
A widow claiming heirs benefit at full retirement age is eligible for 100 percent of the benefit that her late husband was or was eligible to receive. A widow can claim from age 60 (50 if disabled), but her benefit will be permanently reduced for each month she claims before full retirement age. A younger widow may be eligible if she is caring for the late husband’s children.
A widow in her late 50s or early 60s who has no income of her own or has little income is likely to reap the greatest compensation over her life by waiting for the claim until 66 or 67. However, Dr. Mattia said, “The decision becomes Claim time is more complicated if it has its own worker benefits.”
A widow who receives income-based retirement benefits has several options.
One option is to claim her smaller superannuation benefit at 62 and then switch to a larger inheritance benefit at 66 or 67. This way she creates an income stream at 62, while increasing the size of her inheritance benefit.
But experts advise a wife whose retirement benefit at age 70 will be greater than that of the heirs, to take the heirs’ benefit early, perhaps at 60 or 62, and allow it to grow, backed by delayed retirement credits.
“The most important rule for a widow is to compare her retirement benefit at age 70 with the full heirs’ benefit that will begin at full retirement age,” said Dr. Reichenstein.
Dr. Mattia said the husband had a great role in ensuring his wife’s financial security after his death. Husbands are often advised to postpone claiming their pension until the age of 70, and thus increase the inheritance allowance.
“He might think, ‘I won’t live that long,'” said Dr. Mattia, “but, at the same time, she might live a much longer life.”
Whatever strategy a woman uses, financial planners say Social Security should be just one part of retirement income. When Ms. Callaghan turned 70, she said she expected to pay half of her expenses, including travel, with three things: profits from the sale of her business, assets in her individual retirement account, and possibly money from part-time work.
Social Security will cover the other half. Waiting until the age of 70 to collect it, she said, would give her a much better chance “to live the lifestyle I want to live.”
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