“The times, they are a-changing!”
“The times they are a-changing,” Grandpa was fond of telling Grandma as they navigated through the Great Depression, the world changing around them on their small upstate NY farm. Although the Social Security Act was passed with much fanfare in 1935, it was too late for Grandma. As with most women in those days, Grandma spent most of her lifetime as a wife and mother, running the household and caring for their 5 surviving children. The only work she ever did outside the home was as a “domestic” – work which didn’t even contribute to Social Security in the beginning – so Grandma wasn’t eligible for her own Social Security benefit, nor was she entitled to benefits as a spouse because Grandpa’s work history preceded Social Security. Such was the fate of many women of that era – but the times were, indeed, changing.
The Fight for Equality
Subsequent generations of women fought for and, over the years, achieved better workplace equality, although the so-called “glass ceiling” persistently prevents many women from earning as much as their male counterparts. Even today, a time when many corporations boast high-level female executives, the “gender gap” still shows women earn only about 82% of what their male co-workers earn. In contrast, some women choose to simply stay out of the workforce to run their marital household, leaving them with no substantial lifetime earnings record of their own, while still others become widows or, perhaps, divorced spouses suddenly required to live on one income instead of two. There is also the biological reality that women who choose to bear children must take time off from work to do so, often leaving the workplace for extended periods thereafter, while still others are single mothers struggling to make ends meet. All of these factors converge to create a sobering reality – despite the equity progress made in recent decades, women still face unique challenges when planning retirement, especially in deciding when to claim Social Security.
“Gender Neutral” Doesn’t Mean Gender Equality
Social Security’s rules are fundamentally “gender neutral” – that is, the same rules apply to everyone. But for a woman already disadvantaged by lower lifetime earnings, the penalty for claiming Social Security early is even more severe. For example, anyone with a full retirement age (FRA) of 67 who claims SS at age 62 will only receive 70% of their full retirement age (FRA) entitlement, but a 30% cut to a woman’s smaller FRA entitlement is disproportionally punitive. To counter this, a woman who will rely only on her own SS benefit might consider waiting longer to claim in order to receive a permanently higher monthly payment. Waiting longer, of course, may – or may not – be possible, but if there is a choice to work longer and delay claiming SS, doing so will provide for a more comfortable retirement in later years. In fact, a woman who waits until age 70 to claim her retirement benefit will receive a monthly payment about 75% more than the benefit she would get if she had claimed at age 62.
The cards are stacked differently for married women who choose to stay out of the workforce and become stay-at-home mothers and/or household-managing partners. Those who so choose may be entitled to only a very small personal SS retirement benefit or, perhaps, no personal benefit at all, making them dependent on their marital partner for Social Security spousal or survivor benefits. A woman whose personally earned SS retirement benefit at her FRA is less than 50% of her husband’s full retirement age entitlement is entitled to benefits as a spouse while both partners are alive. The amount of the spousal benefit could be as much as 50% of her partner’s FRA entitlement but will be less if claimed any earlier than her full retirement age. Since spousal benefits reach maximum at the woman’s full retirement age but will be reduced if claimed earlier, waiting until FRA (but no longer) to claim the spouse benefit, if possible, is usually wise.
Women who become widows face a still different set of challenges, among them a future with only one SS retirement income instead of two. Although a widow is entitled to the higher of the two benefits (her own or her deceased spouse’s), it is still less than they were receiving together, leaving the widow with less money for ongoing household expenses. On the positive side, a surviving widow can collect her benefit at age 60 (instead of the usual eligibility age of 62) or as early as age 50 if disabled, or even earlier if caring for the deceased’s minor dependent children. Yet, although making the survivor benefit available sooner may be a good thing, taking it early (before FRA) also means it will be permanently reduced (except child-in-care benefits). Like regular spousal benefits, a widow’s survivor benefit doesn’t reach maximum until she reaches full retirement age, thus creating the conundrum of needing to forfeit a higher monthly amount because the money is needed sooner to survive. Although individual feasibility will vary, the longer a widow can wait to claim her widow’s benefit the higher her benefit will be. But a widow’s benefit reaches maximum at her FRA, so waiting any longer is pointless.
Divorced women have somewhat different rules to contend with. If their marriage lasted at least 10 years, a divorced women is entitled to essentially the same options she would have if still married to her ex, provided that she hasn’t remarried. There are, of course, nuances for individual circumstances, and some situations where a divorced spouse is exempt from rules which apply to an ex’s current spouse (such as the Family Maximum), which is why it’s always wise for divorced spouses to consult with a qualified Social Security advisor regarding their eligibility for benefits, especially if there are dependent children involved.
Unique Challenges for Women
As if generally lower Social Security benefits and the resulting financial stress weren’t enough, women must also be mindful of Social Security’s “earnings test” if they must work to make ends meet. The earnings test lasts until full retirement age, which may be years away for women who need Social Security income now. Other rules, such as the Family Maximum, and rules about taxation of benefits and child-in-care benefits may come into play as well. But the message is clear – women face a unique set of challenges when it comes to Social Security.
The AMAC Foundation’s Social Security Advisory Service stands ready to assist (without a fee, of course). Simply call 1.888.750.2622, or email [email protected] for fast, accurate answers to your Social Security questions.
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 Including a woman with no personally earned SS retirement benefit.