What Women Need to Know About Social Security

Terri Spath |

The average retired working woman brings home a modest Social Security check, but all eligible retired women should maximize their benefit! That means understanding how monthly retirement benefits are calculated and making an informed claiming decision.

You may be aware that you can begin collecting your Social Security retirement payout at age 62, but it will be lower. You may also know that the longer you wait to collect benefits, up to age 70, the higher the monthly check. What you may not know is that your choice can result in substantial differences.

Several inputs can affect how much of your Social Security benefit you get to keep. For instance, you might not be aware that Social Security benefits are taxable at the federal level, as well as in 12 states, depending on your income.

Taxes aside, four major factors determine how much any woman receives each month from Social Security:

  • Your work history
  • Your earnings history
  • Your full retirement age
  • Your claiming age

First, looking at work and earnings history, your 35 highest-earning, inflation-adjusted years are used to calculate your Social Security retired-worker benefit. For every year less than 35 worked, you get a “zero”.

The next factor is your full retirement age, the age you become eligible to receive 100% of your retired worker payout. You can’t control this one at all: it's determined entirely by when you are born. Born in 1960 or later and you will need to wait until age 67 to receive your full retired-worker benefit.

Finally, let’s talk about your “claiming age”. Deciding when to claim benefits can have a sizable effect on what you'll receive each month. Taking your payout prior to reaching full retirement age results in a permanent reduction. Waiting until after your full retirement age results in an even higher payout.

When should you start claiming your benefits?

  • Age 62: The biggest advantage for women of claiming as soon as possible is that you get your Social Security income right now. On the other hand, it means accepting a permanent cut to your monthly benefit of as much as 30%. Also, if you keep working during this time, some, or all your benefits may be withheld by the SSA.
  • Age 67: Claiming benefits at your full retirement age (around 67) means you collect your full payout. That requires five years of patience from retirees, and also means leaving money on the table if you live well into their 80s and beyond.
  • Age 70: The advantage for women of taking benefits at age 70 is the ability to increase your Social Security check by 24% to 32% above and beyond what you'd have received at full retirement age but does mean giving up eight years of potential collection from Social Security. If you do not reach your 80s, though, you will likely collect a lower lifetime income relative to an early filing.

At which age should you begin taking your Social Security benefit? Our general recommendation is to wait until you have reached your maximum monthly benefit at age 70. However, several factors will impact this decision for women: health, marital status, and financial situation, among other issues. As with any financial decision of such consequence, it is vitally important to review your options carefully. It can help to work with a qualified financial professional knowledgeable in Social Security.

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This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Zuma Wealth LLC to provide information on a topic that may be of interest. Copyright 2023.