Social Security Claiming Decisions for Women
The choices around when and how to claim Social Security can be numerous depending on each client’s personal financial situation.
Let’s look at some of the basics and how it impacts women:
Eligibility: To claim a retirement benefit on your own record, individuals need a minimum of 40 quarters or at least 10 years of covered earnings. Benefits are based on your age at time of claim and your top 35 years of indexed earnings. If you work less than 35 years, the calculation will include zero earnings years which will reduce future benefits.
Age: Your Social Security retirement benefit is calculated to your “Full Retirement Age” (FRA), which is generally age 66 – 67 depending on when you were born. You can begin collecting Social Security retirement benefits as early as age 62, however, your benefit will be permanently reduced by 25% or more for the rest of your life when compared to your FRA benefit. Claiming benefits early also means you will be subject to earnings restrictions- if you continue to work, you lose $1 in Social Security retirement benefits for every $2 earned, over a yearly indexed amount ($18,960 in 2021). If you wait until Full Retirement Age (FRA) to claim, you can collect your full benefit even if you continue to work.
You also have the option to delay claiming your benefit until age 70. Individuals who delay collecting beyond their FRA get an 8% increase per year added to their benefit up to age 70. The Schroders’ 2021 US Retirement Survey says that “only 10% of non-retired Americans age 45 and older are planning to wait until age 70.” And only 5% of current retirees delayed taking Social Security until they were 70.
Here’s a quick summary of the difference in claiming early vs. delaying for someone whose retirement benefit is calculated at $2,000/month starting at their FRA of 66 ½.
Married Women: Women with no Social Security benefits on their own record who have been married for at least one year are entitled to 50% of their spouse’s FRA amount. In order to claim, you must wait for your working spouse to file for retirement benefits first. If the woman’s own social security benefit is less than half of her spouse’s, she collects her benefit and an additional amount that brings her up to half of her husband’s benefit.
Keep in mind that, if you claim prior to your FRA, your spousal benefit will be reduced similar to if you were claiming on your own.
Typically, the goal for married couples is to maximize survivor benefits by having the spouse with the larger Social Security benefit delay claiming as long as possible, until age 70 ideally, since survivor benefits are 100% of the deceased spouse’s social security benefit.
Divorced Women: If your ex-spouse has a larger Social Security benefit, you were married for at least ten years, you have not remarried, and you are both age 62 or older, you are eligible to collect up to half of his benefit. Unlike married couples, a divorced woman does not have to wait for her husband to file for social security, as long as you have been divorced for at least two years. Again, if you claim prior to FRA, your benefit will be reduced as previously described.
A divorced woman can collect survivor benefits equal to 100% of her ex-spouse’s benefit, even if he remarried (she cannot have remarried). But if she waits until age 60 or older to remarry, then she can then collect survivor benefits on her ex-spouse’s record as a married person.
Widowed Women: Survivor benefits are 100% of the deceased spouse’s Social Security benefit including any delayed increased benefit amount if the surviving spouse has reached FRA or beyond. Widows can collect survivor benefits as early as age 60, but are subject to benefit reductions and earnings restrictions if they continue to work. Additionally, if a woman waits until age 60 or later to remarry, she can collect survivor benefits even if she is married to someone else. A widow can collect survivor benefits initially and then switch to her own retirement benefit, which she’s allowed to grow, until age 70. Or she could collect on her own reduced retirement benefit first and switch to the maximum survivor benefits at FRA.
If your spouse passes and you are caring for a child under age 16, you are entitled to 75% of the survivor benefit.
Reconsidering claiming: If you change your mind within 12 months of claiming benefits, you can withdraw your application and repay the money you received. You can then restart your benefits later at a higher rate.
You can also wait until FRA, suspend your benefits but not repay them and earn 8% a year until age 70. During the suspension, no one can claim benefits on your record and you cannot collect on anyone else’s benefit record.
If you wait and claim Social Security after full retirement age, you can request a lump sum payout of up to six months of retroactive benefits beginning no sooner than FRA. You can also suspend your benefits and earn delayed retirement credits up until age 70. You cannot receive delayed retirement credits for the same time period that you received the lump sum for retroactive benefits.
Life expectancy plays a big part in deciding when to start benefits and is also probably the least quantifiable aspect of planning. The general rule of thumb is that the longer you plan on living, the longer you should wait to claim benefits so that you receive a larger Social Security payment throughout your longer retirement.
ACM Wealth provides Social Security modeling, which can help you assess the impact of different Social Security timing options on your financial plan. Reach out to your ACM Wealth Advisor to let us know if we can help you decide.
By Frani Feit, CFP, ACM Senior Wealth Advisor
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