Social Security is more favorable to women, as they live longer and continue to get richer, according to research presented at the Invest in Women conference yesterday by the American College of Financial Services.
Women now control over half of personal asset in the U.S. and 30% private wealth of the world, according to statistics presented during the discussion. The number of women with $30 million in assets worldwide increased by 31% since 2017. Nearly 30% of women are the breadwinners in opposite-sex households.
And after age 62, the average life expectancy for women is 89.6, two years longer than for the average man.
All this bodes well for the timing and claiming of Social Security income, said Sophia Duffy, associate professor of business planning at the American College of Financial Services. “It becomes more important because if now women have more income, if they are living longer, they are able to claim their own Social Security or their spouse’s,” she said.
Duffy, who spoke during the presentation on "Modern Social Security Claiming Strategies for Women" at the conference sponsored by Financial Advisor, said since 1950, the number of women in the workforce increased from 37% to 71%, and so with fewer women staying home and earning a higher income because more of them have college degrees, they have more options for claiming Social Security.
She said because women are likely to outlive their spouses, financial advisors need to make sure that retirement planning takes that into consideration. “And part of that is really recognizing that Social Security is not only a retirement tool, it’s also a death benefit,” Duffy said, explaining that if the husband should die, spousal benefit becomes important. “So, deciding when to claim and which benefit to claim becomes a really important part of her overall retirement planning.”
The question then becomes how do women protect longevity and how do they make sure they have enough income until death.These quesions also apply to non-working women who may only have a survivor’s benefit to claim. As a rule of thumb, Duffy said, the research shows that when you have a higher earning partner, deferring the higher earning allows women to claim higher benefits down the line. But that’s only if both partners are generally healthy.
Duffy said that claiming early at age 62 will result in a longer payout period, but on the flip side, if you delay payment, you get a higher benefit over a shorter period of time. Women, because of their lifespan, would receive the greatest monetary benefit if they delayed benefit to 70 or even 68, Duffy said.
“When we are planning as a couple, we want to try and defer that higher-earning spouse until as late as possible and particularly if that is the woman, we want to defer to age 70, if possible," she said. That being the case, Duffy said research on delaying benefits to age 70 for a healthy, wealthy woman, comes out to a gain in present value of $180,000 over her lifetime. And for women of average health, the gain was $132,000, more than twice the value for men of average health, the research showed.
Duffy said even adjusting for interest rate (an increase of 2%) and a reduction in benefit (21%) with the assumption the trust fund runs out in 2026, healthy individuals would still benefit from delayed claiming at age 72, particularly women.