Why Social Security Is Particularly Crucial for Older Women’s Financial Security?

By Moon Harper

Apr 03, 2024 06:31 AM EDT

Claiming Social Security benefits is a crucial financial decision for older Americans, particularly for women, as they typically live longer than men and spend more years in retirement, according to Mary Beth Franklin, who is a certified financial planner and Social Security expert.

According to the Social Security Administration, the age at which someone claims Social Security impacts the amount of their monthly benefits. Those who claim before their full retirement age will experience a permanent reduction in benefits. For instance, someone claiming at 62 would receive about 30% less than if they waited until their full retirement age of 67.

Beneficiaries will receive delayed retirement credits, which are an 8% guaranteed increase in their Social Security checks for each year they defer beyond their full retirement age, up to 70. For instance, someone claiming at 70 would receive 124% of their full benefit at age 67.

Why Is Social Security Crucial for Women?

Franklin said guaranteed income, such as Social Security, is crucial for women.

According to the Centers for Disease Control and Prevention, women live nearly six years longer on average than men, with a life expectancy of 79 compared to 73.5 years for men.

This life expectancy gap has been widening, reaching 4.8 years as recently as 2010. As a result, women must stretch their income over a more extended retirement period, increasing the risk of running out of money.

Women also save less than men due to lower average earnings and potential career interruptions for caregiving responsibilities, such as caring for children or elderly parents, Franklin explained.

Things to Consider When Claiming Benefits

Social Security monthly benefits are typically determined by age and lifetime earnings history.

"Full retirement age" is when individuals become eligible for their full Social Security benefit, ranging between 66 and 67 depending on their birth year. However, Americans can claim benefits as early as age 62, with a permanently reduced monthly benefit. This is generally irreversible, with only a few exceptions.

According to Franklin, claiming Social Security benefits early could have valid reasons, such as when individuals are facing poor health or financial hardships.

There are intricate regulations for couples concerning spousal and survivor benefits and considerations for divorce scenarios, which may also contribute to situations where claiming Social Security benefits early is more beneficial.

Your Social Security benefits may be temporarily reduced due to an earnings cap if you continue working after claiming benefits, particularly before reaching full retirement age, which stands at $22,320 as of 2024.

Another advantage of waiting to claim Social Security benefits is the opportunity for a more significant annual cost-of-living adjustment (COLA) in dollar terms. The COLA percentage would be applied to a more extensive base of benefits each year.

Franklin noted that delaying Social Security benefits beyond 70 years old would unlikely result in a financial benefit, as delayed retirement credits cease to accrue past that age.