It’s no secret that women have fundamentally different savings and investment needs and challenges than men. Longer expected lifespans, fewer years in the workforce (with resulting lower balances in IRA, 401K, 403B, and other retirement accounts), and a persistent wage gap all mean that women need to be purposeful and strategic when it comes to planning for retirement and other long-term financial considerations.
Furthermore, bereavement and divorce are two of the most harrowing events anyone can face, no matter which phase of life they occur in. And for American women, who statistically have retirement savings balances more than 50% lower than their male counterparts, facing financial uncertainty in the later years can present some harsh challenges.
And the problem isn’t just with retirement savings. A recent study by the TIAA Institute found that women typically collect about 22% less in Social Security benefits than men. The reasons aren’t hard to discern; by stepping aside from their careers in order to be caregivers to either children or aging relatives, women sacrifice, on average, $131,000 in lifetime Social Security benefits.
All this points to how vital it is for widowed or divorced women to have the right financial coaching and accurate advice on everything pertaining to retirement savings and income. This is especially important with regard to options available through the Social Security system that may provide them with enhanced income in their retirement years.
Social Security Claiming Options: Some Basic Guidelines
Without question, Social Security is central to virtually everyone’s retirement strategy. For women, this is doubly true. And, as with other financial aspects of life, there are some special considerations that women in transition, whether because of bereavement or divorce, should keep in mind when thinking about Social Security.
1. The longer you can wait to claim benefits, the bigger your monthly check.
While you can claim Social Security as early as age 62 (“early retirement”), you will receive a reduced benefit for the rest of your life. For those born between 1943 and 1954, full retirement age—when you can begin receiving your full benefit—is 66. If you were born in 1955, your full retirement age is 66 years and 2 months. For 1956, add two months to the age for 1955 (and the same applies for years 1957–59; in other words, those born in 1959 reach full retirement age at 66 years and 10 months). For those born in 1960 and later, full retirement age is 67. But you aren’t required to begin taking benefits at your full retirement age. In fact, for every year you wait beyond your full retirement age, your monthly benefit increases, up to a maximum of 132% of your full benefit if you delay until age 70 (no further increases occur after age 70).
2. Multiple marriages and spousal benefits.
Many women who have had multiple marriages, whether they ended by death or divorce, may not realize that they have a choice for which spousal benefits to claim. While no one can receive benefits from more than one source at a time, it is possible to choose among multiple available sources to ensure the maximum benefit. Keep in mind that the spousal benefit is capped at 50% of the earning spouse’s Social Security benefit at full retirement age (FRA). The SSA will pay whichever benefit is greater: the claimant’s own benefit or the spousal benefit. If, for example, a woman is eligible for a $1,000 monthly benefit on her own record, but the spousal benefit would amount to $1,200 per month, her benefit will be “topped up” to $1,200. In the case of divorced women, they must be unmarried at the time of claiming, and the marriage for which they are claiming spousal benefits must have lasted at least ten years.
3. Claiming spousal benefits does not affect an ex-spouse’s Social Security payments.
Many divorced women are hesitant to claim spousal Social Security benefits because they’re afraid the ex-husband will have his benefits reduced or otherwise changed. But in fact, receiving a spousal benefit has no effect whatsoever on an ex-husband’s benefit. In many cases, the “earning” ex-spouse may not even know that the spousal benefit is being paid. In fact, the “earning” spouse may not even currently be receiving benefits (if, for example, he is waiting until age 70 in order to receive the maximum benefit). The only requirement is that he be eligible to receive benefits. (By the way, if the “earning spouse” waits beyond FRA to claim benefits, that has no effect on the amount of the spousal benefit; it is capped at 50% of the primary earner’s available benefit at FRA.)
4. Social Security Survivor Benefits.
Married women who have reached FRA and who lose their spouses after the spouse was already receiving Social Security benefits may continue to receive the same benefit the deceased spouse was receiving. If the spouse passes prior to receiving benefits, the surviving spouse is entitled to receive a benefit calculated on the deceased spouse’s earnings record and equivalent to what the deceased spouse would have received at FRA. If the deceased spouse was over FRA but had delayed claiming to increase benefits payable, that increase will be reflected in the benefit paid to the surviving spouse.
Social Security for Widowed Women with Children
Unmarried children up to age 19 can receive benefits if the deceased parent worked long enough for an employer who paid Social Security Taxes. You can apply at www.ssa.gov; you’ll need the child’s birth certificate or proof of adoption, along with Social Security numbers for the child, yourself, and the deceased parent.
If you or someone you know is facing a difficult life transition because of bereavement or divorce, a JFS financial advisor can be a valuable source of information and advice. Please let us know how we can help provide the answers you need to plan with confidence for the future.
How can I gain financial confidence after the loss of a spouse?
