When it comes to Social Security benefits, the decision of when to claim them is crucial for all older Americans, but it holds even more significance for women. According to Mary Beth Franklin, a certified financial planner and Social Security expert, this decision is heavily influenced by the factor of longevity. Women, on average, tend to outlive men and spend more years in retirement. Therefore, the age at which one claims Social Security can have a significant impact on the size of their monthly benefits.
The Financial Incentive to Wait
One key point to consider is that claiming Social Security before reaching full retirement age results in a permanent reduction in benefits. For instance, those who claim benefits at age 62 would receive around 30% lower benefits compared to waiting until the full retirement age of 67. On the other hand, beneficiaries who defer claiming beyond their full retirement age can receive an 8% guaranteed increase in their benefits for each year up to the age of 70.
Considering Longevity and Income Stability
Guaranteed income from sources like Social Security is particularly crucial for women due to their longer life expectancy. With women living approximately six years longer than men, they need to carefully manage their income to cover a longer retirement period. Furthermore, women often have lower average earnings and may have taken time off work for caregiving responsibilities, resulting in less retirement savings compared to men.
Although claiming benefits as early as age 62 is an option, it locks in a lower monthly benefit for life. Mary Beth Franklin emphasizes that the claiming decision is irreversible in most cases. However, individuals in poor health or facing financial hardships may have valid reasons to claim benefits early. Additionally, there are complex rules regarding spousal, survivor, and divorce benefits that may impact the optimal claiming strategy for couples.
Impact of Delaying the Claim
Delaying the claim for Social Security benefits can result in a larger cost-of-living adjustment and a higher base benefit for future COLA percentages. However, delaying benefits beyond the age of 70 does not yield additional financial benefits, as delayed retirement credits do not accrue past that age. Despite concerns about Social Security trust funds running dry, experts like Mary Beth Franklin advise against claiming benefits early out of fear, as Congress is expected to take action to ensure benefit payments.
The decision of when to claim Social Security benefits is a critical financial choice, especially for women who tend to have longer life expectancies and lower retirement savings. By carefully considering factors such as longevity, financial stability, and spousal benefits, individuals can make informed decisions to maximize their Social Security income. While early claiming may be necessary in certain circumstances, delaying benefits can lead to higher monthly payments and greater income stability in retirement. It is essential for individuals, particularly women, to seek guidance from financial experts to navigate the complexities of Social Security claiming strategies and secure their financial future.
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