4 Things Every Woman Should Know Before Claiming Social Security Benefits
By lb50 on March 3, 2017
Debbie hired our firm for a consultation about claiming her Social Security benefits. She initially indicated she was single, but after only a few minutes of conversation, I learned Debbie was divorced. Here’s my overly simplistic, abbreviated version of the conversation:
Me: Single?
Debbie: Divorced.
Me: Married 10 years?
Debbie: 22.
Me: Did he make more?
Debbie: He was a surgeon.
Me: Divorced spouse benefit for you!
Debbie: Great, but he died.
Me: Bonus!
My intent is definitely not to offend anyone, but rather to give a glimpse into how women are often unaware of important rules about Social Security that may provide more income.
I’ve spent years consulting with Americans about their benefit claiming strategies. Whether single, married, widowed or divorced, women tend to be the least prepared for these discussions and are often unknowingly willing to make claiming mistakes that cost tens of thousands – or more – in lifetime benefits. Here are the 4 biggest mistakes I see women making with their Social Security benefits:
- Not knowing their options. Debbie is a great example of a woman who didn’t know her options. She had no idea she was eligible for a divorced spouse benefit – and certainly not a surviving divorced spouse benefit. The difference in her benefit was over $1,500 every month!
My point is that the rules of Social Security are complicated and voluminous. Women often aren’t aware of the different types of benefits that can be combined for additional cumulative income. It’s also not a “one-size-fits-all” scenario. Each household will have unique factors that influence how benefits should be claimed.
- Overlooking the spousal benefit. I continue to be surprised by the number of Americans who aren’t aware of the spousal benefit. For women who’ve not worked enough years to qualify for their own benefit, they are still eligible to collect a spousal benefit – or a divorced spouse benefit – on the earnings of a spouse or ex-spouse. That’s right. Even if you’ve never worked outside the home, you can collect up to half of a spouse’s full retirement benefit. As a bonus: those born on or before January 1, 1954, qualify for a special rule that lets them collect the spousal benefit for a few years then switch to their own retirement benefit to get even more money.
- Claiming too early. Too often, women are eager to quit work and begin Social Security benefits. But claiming a retirement benefit at age 62 results in a 25% reduction in payments – more if the full retirement age is greater than 66. If claiming a spousal benefit, the reduction is 30%. The problem is that women aren’t looking beyond the first few years of retirement when their assets may be running lower than expected – or when they may face a late-in-life divorce. While it may be challenging to wait until age 70 to claim a retirement benefit, it’s 75% more every month than if the benefit begins at age 62 for a woman whose full retirement age is 66. Having a larger benefit later can turn out to be crucial monthly income.
- Not maximizing the survivor benefit. Women spend more time in widowhood than men. In fact, only a small percent of all Americans receiving a Social Security survivor benefit are men. The maximum survivor benefit occurs when the higher earner in a couple postpones claiming his or her own benefit until age 70. In my consultations with couples about to claim benefits, this is the most important point I cover. Married women should begin this conversation with their husbands now to solidify this decision and provide the maximum income late in life.
These four mistakes can cost women substantial income in retirement – thousands of dollars each year in some cases. It’s important that women understand their options and how various benefits can be claimed to maximize benefits. But it’s impossible to figure all of this out on your own. Software that considers all of the options available to you and tells you exactly how to get the most in benefits is a wise investment. Our software, available at www.SocialSecuritySolutions.com, has a menu of options with a service affordable for any budget.
By Robin Brewton
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