There’s no disputing the fact that women live longer than men, but, according to a Nationwide Financial survey, only 3 percent of women wait to take their social security benefits until they’re qualified to receive the maximum amount. The decision to start receiving social security benefits at the full retirement age of 66, or even to start collecting them early at age 62, means that women can miss out on hundreds of thousands of dollars of much-needed retirement income - a social security mistake to avoid if possible.
One in four women reaches the age of 92, and with rising healthcare costs, it’s increasingly important that women work with a financial advisor to create and monitor a retirement income plan. However, only 33 percent of women currently work with financial advisors. Those who don’t work with financial advisors are nearly three times as likely to report that their Social Security payments are less than they anticipated.1
When It Comes to Social Security, Timing Matters
The full retirement age, according to the Social Security Administration, is 66 years. This is the age at which you can receive your full benefits. However, if you delay your benefits, you will earn 8% more per year until you reach the age of 70.2 Delaying your benefits significantly increases your retirement income over the years ahead. Since the average life expectancy for women is currently 86 years, you could be looking at many years of increased benefits.
On the other hand, it’s possible to start collecting Social Security benefits early, at age 62. Many women who find themselves in financial difficulties in their early 60s turn to early Social Security payments as a solution to their problems, but this is often a mistake in the long-term because their total benefits are then permanently much smaller. By holding off on the collection of benefits, women can maximize their benefits.1
Options for Collecting Social Security Benefits
There are several strategies women (and men) can use to delay and potentially increase Social Security benefits. Let’s take a look at two:
The File-and-Suspend Strategy
The file-and-suspend strategy works well for married women. To use this strategy, apply for Social Security benefits at the full retirement age of 66. This allows your spouse to begin collecting benefits based on your earnings record. As soon as you file, however, suspend your own benefits so you don’t start collecting them until you reach age 70. This allows you to receive the 8% per year benefit for delaying your collection while allowing your husband to begin collecting on your earnings.3
Alternatively, consider having your husband file and suspend his own benefits if he worked longer or earned substantially more.
Read more about the File and Suspend strategy here.
The Restricted Application for Spousal Benefits
Another strategy is for both of you to start collecting spousal benefits at age 66 while simultaneously allowing your own Social Security benefits to grow through the accumulation of delayed retirement credits. If you use this strategy, make sure that you complete the form stating you’re restricting the application to the spouse benefit and not collecting your own earned benefits.4
Learn more about the Restricted Application here.
As you can see, there are several ways women can maximize Social Security benefits and increase their their retirement income. One of our Wealth Managers can help you to make a plan that can serve you well both now and in the future. You can reach them at (800) 541-7774 or Wealth@WrapManager.com . Don’t let the promise of a longer lifetime cause you stress and anxiety; plan for the future and live it to the fullest.
Leslie is a Client Service Specialist at WrapManager, Inc.
Sources:
2 JP Morgan Guide to Retirement
3 CBS News
4 AARP
Additional Disclosure: WrapManager, Inc. is not a tax advisory firm. We recommend you contact your tax attorney or CPA prior to utilizing any of the tax-related strategies mentioned or discussed.
