Why longevity makes Social Security so important for women

WEST PALM BEACH, Fla. — Choosing when to claim Social Security is a decision that can carry big financial stakes for all older Americans, but it’s especially important for women.

“It all comes down to longevity,” Mary Beth Franklin, a certified financial planner and Social Security expert, said Thursday at Financial Advisor Magazine’s annual Invest in Women conference in West Palm Beach, Florida.

“Women tend to live longer than men and tend to spend more years in retirement than men,” Franklin said.

The age at which one claims Social Security affects the size of their monthly benefits.

There’s a financial incentive to wait. People who claim before their “full retirement age” see their benefits permanently reduced. Someone who claims this year, upon turning 62 years old, would have a benefit about 30% lower than if they waited until their full retirement age of 67, according to the Social Security Administration.

Beneficiaries get an 8% guaranteed increase in their Social Security checks for every year they defer beyond their full retirement age, up to 70 years old. This is due to something called “delayed retirement credits.”

For example, someone who claims at 70 would get 124% of their full benefit at age 67.

That income is guaranteed for life.

Women live almost six years longer than men, on average, to age 79 versus 73½ years old, respectively, according to the Centers for Disease Control and Prevention.

That life expectancy gap has widened. It was 4.8 years as recently as 2010.

This means women must spread their income over a longer time in retirement, raising the odds they’ll run out of money.

Women also often put aside less savings relative to men, both because their average earnings at work are lower and they may have taken time off to care for kids or an aging parent, for example, Franklin said.

“Full retirement age” is the age at which someone becomes eligible for their full Social Security benefit. That age may be between age 66 and 67, depending on when someone was born.

However, Americans can claim benefits as early as age 62.

Doing so locks in a lower monthly benefit for life. The claiming decision isn’t reversible except in a few circumstances, Franklin said.

There may be reasons why it would make sense to claim early: for example, someone who’s in poor health and doesn’t expect to live a long time, or for households that “need the money” now, perhaps due to a job loss, Franklin said.

There are also complex rules for couples regarding spousal and survivor benefits and in circumstances of divorce that may also make it more advantageous to claim early in certain instances, she said.

Importantly, continuing to work after claiming benefits — if before full retirement age — may temporarily reduce your Social Security benefits due to an earnings cap. That cap is $22,320 in 2024.

Another benefit of waiting: Delaying a claim also means a larger annual cost-of-living adjustment, in dollar terms, Franklin said. That’s because the COLA percentage would be applied to a larger base of benefits each year.

Delaying past 70 years old likely wouldn’t yield a financial benefit since delayed retirement credits don’t accrue past that age, Franklin said.  

It also doesn’t make sense to claim early out of fear Social Security’s trust funds will run dry, Franklin said. Without action from Congress, that’s currently forecast to happen in 2033, at which point roughly 80% of promised benefits will be payable.

“[Congress] will step in, even if it’s at the last minute,” Franklin said.

“If you need the money, go ahead and claim Social Security early,” she added. “But if you’re claiming Social Security out of fear. It’s like selling stocks in the down market,” since you’ve “locked in a loss.”