Women and Social Security

Some facts from the SSA:

• Women reaching 65 in 2012 are expected to live an additional 21.4 years.
• In 2012, the average annual Social Security income received by women 65 years and older was $12,520 compared to $16,398 for men.
• Social Security is 50.4 percent of unmarried women’s income and 30.2 of elderly couples’ income.
• For about half of elderly unmarried women, Social Security is 90% of their household income.

       From these statistics, you might conclude that women take Social Security too early, and in most cases because they have to. For Social Security to make up almost all of single female household income certainly suggest dire circumstances. It could also represent a fundamental misunderstanding of the benefit. Taking it early to get the longest and greatest total benefit payout is a common wisdom, perhaps driven by a concern that we will not live longer than average. Witness that over half of the population, men and women, take their benefit at age 62. There is trend towards waiting longer but the average is still closer to 62 than 65.

      Yet the benefit is not gender specific. Women have an average life span longer than the average population (men and women). This means they would benefit from waiting as long as possible to take the benefit and would be naturally disposed to ‘beat the odds’.

      On the other hand, married couples may delay one benefit while taking the other. There are several ways to strategize this and it is very dependent on individual circumstances. The result is that often the husband’s higher benefit is delayed past full retirement age while the wife begins taking the benefit early. At the death of the first, the higher benefit becomes the survivor benefit. Think of it as icing on the cake.

       Only 15 percent of women wait until full retirement age to take their benefit. For most women, and especially for unmarried women, the most significant change they can make to the quality of their retirement is to delay social security for as long as health and work prospects allow. 

Written by Bob Stowe, CFP®

Issued on Novemeber 24, 2014