It’s common knowledge that people who delay taking Social Security between the ages of 62 and 70 stand to receive more in benefits when they take them. But new research suggests that women have more to gain than men by postponing retirement and putting off Social Security claims.
That’s because women often have more years of low income—or no income—to make up for with higher earnings in their later years in order to boost their monthly Social Security payments.
Social Security payments are based on workers’ highest 35 years of wages, adjusted for inflation. A study by Boston College’s Center for Retirement Research found women are about three times more likely than men to have a zero-earnings year at some point in those 35 years.
Nearly half of all women are in this position. They may have chosen to extend their education, raise children or care for elders, according to the study’s author,
Matthew S. Rutledge,
a research economist at Boston College. And the closer a woman is to retirement when her income drops, the bigger the impact may be, because the last years of a working life tend to be among the highest-earning years.
Paying the price
Diane Doyle Strobel
left her job at age 61 after her husband, Dennis, was admitted to hospice care. After a long career in hospital administration in Louisville, Ky., she had just been promoted to a management position with statewide oversight.
Ms. Doyle made a calculated gamble, thinking she’d be sidelined for six to 10 months, weighing the financial loss against other income and savings. Three years later, her husband is still alive, in the final stages of a progressive dementia. Ms. Doyle hasn’t returned to her hospital job.
As a result, just as her earning power was hitting its highest level, Ms. Strobel’s income took a plunge. For the past three years she has drawn only a minimal wage from a family-owned insurance business.
In addition, Ms. Strobel began collecting Social Security two years ago when she turned 62—much earlier than she had planned. So her payments were reduced both by the decline in her income and by her not waiting longer to start receiving benefits. She says she wishes she could have done more to protect her retirement security, including finding a less stressful job that would have given her the time to care for her husband and kept her income from falling so low.
Women who don’t have 35 strong earnings years, Mr. Rutledge says, should consider working longer, even part-time.
It doesn’t take much additional work to make a big difference in Social Security payments. The Boston College study found that working one additional year raises women’s monthly benefits by 8.6% on average—7% from an actuarial adjustment and an additional 1.6% from late-career earnings. Men’s benefits increase by less on average—7.8%—because they tend to have fewer low-earnings years to replace.
Overall, women who delay taking Social Security until 70 increase their monthly payment by 88% over their benefit at age 62, compared with 82% for men. This issue is important because women rely more on Social Security than men, says
founder of Cathy Pareto & Associates Inc., a wealth-management firm in Coral Gables, Fla.
Since women live longer than men, and have earned less on average during their careers, she says, they are at greater risk of running out of retirement funds. Two-thirds of unmarried women, including widows, above age 65 rely on Social Security for more than half their income, Ms. Pareto says.
She says women often fail to remember that by stepping out of the workplace for caregiving, they’re sacrificing much more than their salaries. “This usually translates into a total cessation of retirement plan—such as 401(k)—contributions, and zero credits into the Social Security system for those years, both of which negatively impact their personal wealth and financial security,” Ms. Pareto says. “The cumulative effect of this can spell hundreds of thousands of dollars.”
To see a record of earnings the Social Security administration is using in its calculation, people can go to https://secure.ssa.gov/ and create an account or log in. On the home page, click “View Earnings Record.”
Ms. Gallegos is a news editor for The Wall Street Journal in New York. She can be reached at firstname.lastname@example.org.
Appeared in the June 12, 2017, print edition as ‘Women Gain Much By Delaying Social Security.’