It is an unfortunate fact that women are missing out on a whopping 30% of Social Security retirement benefits. Although this seems unfair, it is not actually the fault of the Social Security Administration (SSA). Instead, it is because women are making some huge mistakes that account for the discrepancy. The information below highlights those errors and provides suggestions for rectifying them.
Time of Retirement
As recently as three years ago, data from the SSA showed that 40.8% of women collected retirement benefits at the age of 62. 60% of women under the age of 65 were collecting benefits and only 2.8% of women ages 70 and above claimed theirs. Although the minimum age to collect benefits is 62, women who claim benefits at this age lose a significant percentage (up to 30%) of their benefits when compared to those who wait just three years and begin collecting benefits at age 65. In real terms, that means a woman who is eligible to receive $1,200 per month can reduce her payments to $840 by claiming her benefits at age 62. Over the course of a single year, that loss adds up to $4,320. Further, once a woman reaches the age of 65, she is eligible to receive either her full benefit or half of her husband’s, whichever is greater. If she claims her benefit at age 62, she is only eligible for 79% of her benefit or 32.5% of her spouse’s benefit.
Living on Retirement Benefits Alone
Even though many women opt to wait until they turn 65 to retire, they often try to live on their retirement benefits alone, with no other supplemental type of income. This practice is problematic as it forces many women to live below the poverty line and they often have to do without some basic necessities of life. Often they are forced into getting part-time jobs or relying on help from their children just to make ends meet.
How can Women get More From Their Retirement?
Women do not need to be relegated to a life of financial peril during their retirement. One great way to prevent a financial hardship in your retirement years is to start planning early. Start a retirement plan as soon as possible and put as much pre-tax money as you can afford into conservative investments. If you can save $100 per month starting when you are 35, you can reach around $1 million in tax-sheltered retirement funds by the age of 70. If you are past that age, or just cannot put away $100 per month, you can still plan for retirement by waiting to collect your retirement benefits several years beyond typical retirement age. Every year you delay retirement can increase your benefit amount by about 32% if you do not collect benefits until you are 70 years old. If you choose this route, you do not have to work until 70. Instead, you can rely on other forms of savings or consider a reverse mortgage for your liveable income source.
If you have any questions about Social Security retirement benefits for women, contact Fred London Law today.