What Women, of all Ages, Must Know About Social Security

September 29, 2017

 

 One theme runs constant when speaking to and working with women = the desire for a sense of security.
 

Social Security adds a little bit of that in our lives. For those that are near retirement or in the retirement stage of life this safety net is a pretty secure one. For the younger ladies reading this, you may feel like you cannot depend on it being there. I don’t blame you! News outlets have done a great job of creating fear around the demise of the social security system. Keep reading, this will be covered further down.


Why is it important for women to be aware of social security?

  1. Social security is based on income and years worked. Women, on average, make less than their male counterparts and they work fewer years due to motherhood and caregiving. So, women still receive significantly less in social security payments each year compared to men.
     

  2. For unmarried women 65 and older, including widows, social security makes up ½ of their total income per year. It makes up 80% of income for women 85 and older. DID YOU READ THAT? 80%. This means that social security is a very important piece to a woman’s livelihood.


Clarity moment: Social security is just like it sounds, it’s a social way of providing security for others. It was established in 1935 to alleviate poverty among the elderly during the Great Depression. It was created as a self-financing program that would collect payroll taxes from workers which would immediately be paid out in benefits to retirees[1].
 

Now onto what you should know about social security. Keep in mind that this list was created out of the many questions I have been asked and resources that exist out there in the universe. For your sanity, social security will be called SS for the rest of this post.
 

What to know at all ages:

  1. It is recommended that everyone go to ssa.gov and sign up for an account. Here you will find a lot of information, calculators, and most importantly your personal SS information.
     

  2. Every year you should log in and make sure that your earnings are reported correctly. If they are not you should get in touch with the social security administration right away and have it corrected. The reported amount is what they base your payments on so this is an important yearly task


Don’t I receive a statement in the mail on my birthday?

 

Yes, the SS administration used to send you a “birthday card” aka SS statement every year. Remember it was printed in color and was kind of like a two-page pamphlet? Well, they stopped doing this due to cost, I’m assuming. They still send them out but I want to say the interval is every few years and it’s a black and white print out. So, your best bet is to sign up online to verify your earnings statement.

 

What to know when nearing retirement:

  1. Your full retirement age, the age at which you receive 100% of your SS, is dependent on the year you were born. 1943-1954 = Age 66, add 2 months for each year 1955-1959, and 1960 or later = 67


Clarity moment: full retirement age has absolutely nothing to do with the year you can or should retire from your job. For some reason, these two have gone hand in hand in the minds of many. It’s an age used for SS claiming purposes only. On a similar note, you are not required to claim SS just because you retire, hit age 62 or full retirement age. The “RIGHT” age to start taking SS is all dependent on the individual.

  1. SS increases 8% per year each year after your full retirement age. This means that if you wait to take SS the monthly payment will increase by 8% per year until you reach age 72. Again, when you should take it is dependent upon your situation.
     

  2. If you are under the full retirement age and still working your benefit may be reduced
     

  3. If you continue to work beyond your full retirement age and you have not started taking payments then your benefit has the potential to increase
     

  4. You can take your SS or half of your spouse’s whichever is higher
     

  5. If you are divorced you can still claim based on your ex-spouse’s SS IF you were married for 10 or more years and you have not remarried.


What to know if you are 10+ years away from retirement:

 

Most people associate SS with retirement but it is a safety net for more than post working years.

  1. The SS system pays disability for people with enough credits and survivor benefits for children. So, think of SS as more than a retirement pool.
     

  2. You may have heard the system is going to bankrupt but the time you retire. That is not the case as of now. Reports have stated that the SS system will be able to pay 70% or promised benefits in the future. How do we know this is a possibility?
     

  3. There are many baby boomers taking social security but gen x, y and z will continue to pay into the system which will keep it funded in some capacity.
     

  4. The SS Administration is tightening their belt by: Cutting printing costs for statements and closing shutting down claiming strategies that people used to benefit from.
     

  5. Your benefits will be based on income you receive each year that is reported by your employer or by you, if you are self-employed. So, if you are self-employed and you are pushing it on tax-deductions or not claiming income, your SS benefits may  be reduced. Who does this mainly affect?  The single woman that is self-employed and will never receive half a spouse’s SS benefit. This comment is not tax advice it is meant to illustrate the way our decisions effect SS benefits. Please speak with your tax preparer before making any tax adjustments.
     

  6. SS benefits are calculated by averaging 35 of your highest earning years. Eligibility is based on a credit system. You need a total of 40 credits to be eligible for social security (disability is different in terms of credits). You can earn up to 4 credits per year. So that means if you earn 4 credits per year then you will need to work 10 years. In 2017 it takes $1,300 income. So $5,200 of income will give you the 4 credits you need for 2017

 

WOW! Did you make it through the entire post? There is so much to know about SS and claiming strategies. This post is just the tip of the ice burg.

 

If money concerns are keeping you from living a confident and fulfilled life, please do not hesitate to reach out. CLICK HERE TO CONTACT WEALTH OF CONFIDENCE.

About WOC and Breanna Reish

Breanna Reish, CFP® is the Founder of Wealth of Confidence, a fee-only women focused wealth firm in Riverside, CA. After working with clients for 9 years she decided to build a firm in order to create an inviting environment where women are encouraged to discuss their money without judgment, to learn about their investments in a way they enjoy, and to become more comfortable managing their money with confidence.

 

Wealth of Confidence, LLC is a Registered Investment Advisor with the state of California. 

 

 

[1] “The Baby Boomers Guide to Social Security”; Horsesmouth, 2015

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