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"Women represent 57 percent of all Social Security beneficiaries age 62 and older and approximately 68 percent of all beneficiaries age 85 and older"
- Social Security Administration
BY JULIA ANDERSON
With bank savings accounts and CDs paying next to nothing and stock markets in risky territory, how and when to take Social Security benefits is a key element of retirement planning, especially for women.
However, the strategy is often more complicated than just delaying benefits to garner a higher benefit payout, says Kelly O’Donnell, executive vice president of Financial Engines Inc., a California-based investment advisory company.
“Women face unique challenges in retirement because they typically have saved less but will live longer,” O’Donnell said in a telephone interview. “Women need to make the most of Social Security decisions.”
That’s not easy since there are 2,700 different claiming rules related to age, marital status, income and survivor-ship. Those rules, in turn, generate 8,000 possible claiming strategies for those --- married and single -- nearing retirement.
“It’s not just a matter of delaying Social Security benefits,” O’Donnell said. “It’s a personal decision that requires careful planning and maybe outside financial advice.”
Financial Engines is in the business of helping people with planning as the nation’s largest independent investment adviser. It provides services to more than 9 million employees working for more than 580 companies. Clients include more than 140 Fortune 500 corporations. The company recently conducted a survey to find out more about how people are feeling about retirement planning and life in retirement.
Women look forward to retirement!
The Financial Engines survey determined that despite challenges, more women than men look forward to retirement. Fifty-one percent of women surveyed said that they are looking forward to retirement, compared to just 41 percent of men.
“After spending their lives working, raising kids, and often acting as caregivers to aging parents (or a spouse) many women see retirement as some much-needed and well-deserved ‘me time,’” she said. “But to get the most of their lives after work, women need a plan for funding their outside interests in retirement. Given the interest rate environment, there are a lot of people facing retirement who just don’t have enough…delaying Social Security is the best deal in town," she said.
That’s because (if you were born in 1943 or later) for every year you delay claiming benefits, Social Security tacks on an 8 percent increase in the annual benefit payout up until you reach age 70.
According to the Social Security Administration as reported by Financial Engines, when a member of a married couple dies, the survivor, who is more likely to be the woman, will live an average of 11 years on his or her own.
When and how you claim Social Security affects the benefit amount you’ll receive and potentially your quality of life in retirement, cautions O’Donnell.
Claiming too early can mean missing out on as much as $100,000 or more in benefits for individuals and $250,000 or more for married couples.
“Deciding when to claim Social Security is an important decision for everyone, but it’s especially important for women,” explained O’Donnell. “The bottom line for women is that it’s important to have a plan to maximize your income in retirement.”
To help women (and men) make informed Social Security claiming decisions, Financial Engines has made its Social Security Planner (click here) available to everyone at no cost. Additional planning information and resources can be found at www.corp.financialengines.com/women.
O’Donnell said it is “amazing” that when she talks to educated working people that there is still a big “wow” when it comes to the complexities of Social Security.
“Lack of information can mean leaving a lot (of money) on the table,” she said.
Other Financial Engine survey results:
- 29 percent of women vs. 40 percent of men are worried about retirement.
- 20 percent of women vs. 25 percent of men are worried about getting bored in retirement. Women looking forward to retirement are most excited about spending more time with family and friends (74 percent), travel (58 percent), pursuing a favorite hobby or passion (56 percent) and volunteering (44 percent). Forty-eight percent also expressed interest in sleeping in later.
“While women have to plan for living longer and often start out retirement with less accumulated wealth due to absences from the workforce , our survey found that they are more comfortable with themselves as they get older and want to do more in retirement,” O’Donnell said.
While the majority of women were looking forward to retirement, one-in-four (27 percent) admit to feeling anxious about their financial futures, regardless of how much money they earn now. Women are most concerned about rising health care costs (44 percent), running out of money (43 percent) and Social Security going bankrupt (30 percent). That general anxiety around retirement is not entirely unfounded, said Financial Engines.
A 65 year-old woman today can expect to live to 86.6—more than two years longer than men. According to Financial Engines, the median 401(k) account balance for men age 60 and older is about $84,000 and only $43,000 for women in that same age group.
According to the Social Security Administration, when a member of a married couple dies, the survivor, who is more likely to be the woman, will live an average of 11 years on his or her own. When you claim Social Security affects the benefit amount you’ll receive and potentially your quality of life in retirement.
For more – Web sites:
Administration on Aging: National Education and Resource Center on Women and Retirement PlanningChoosetoSave.org
Employee Benefits Security Administration, click here.
Financial Literacy & Education Commission, click here.
IRS: Changes in Your Life May Affect Retirement Planning, click here.
Retirement Toolkit, click here.
Securities and Exchange Commission: Office of Investor Education and Assistance, click here.
Social Security Administration for Women, click here
USA.Gov: Retirement Resources
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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