Why women often have lower Social Security benefits

Maximizing Social Security benefits has joined the ranks of other planning techniques to add to retirement income. Recognizing just one fact, for instance — that there can be a 32 percent increase in benefits between collecting benefits at age 70 instead of at full retirement age at age 66 — can make most people think. How many safe investments today, after all, generate a predictable return of 8 percent per year for four years with the higher benefit continuing on for life?

One of the least recognized facts about Social Security, however, is that not working in the Social Security system for a given number of years may dramatically affect lifetime benefits. I came to this realization myself based on reading and experience with clients.

The article that originally got me thinking was issued by Boston College and titled “Why Are So Many Older Women Poor?” It included Social Security.

As I watched women clients, I noticed how low the monthly Social Security benefit was. Where both spouses had worked, while a husband’s benefit might be $2,000 a month or more, his wife’s benefit could be $400 or $500 a month. This can be improved by requesting Social Security to base the wife’s monthly check on one-half of her husband’s benefit but adjusted for the age when her benefits began. In other words, if a wife claimed on her husband’s benefit when he was 66 but she was 62 she would receive less than half of his.

Women historically have had lower earnings than men especially for women now beyond retirement age. Still, the gap remained unexplained until I made a discovery.

Social Security is calculated considering the worker’s highest 35 earning years. It adjusts for inflation, determines the average adjusted monthly earnings, and multiplies by a formula.

Suppose an employee has not worked 35 years in her or his lifetime before retirement? The years not worked in Social Security are counted as zeros. The years out of the Social Security work force can make an

enormous difference.

It does not take a mathematician to figure that working fewer than 35 years can seriously undermine benefit calculations. This is one way that women, especially older women, tend to have lower Social Security retirement benefits on their own work record.

When a mother (or father) stays home to raise children, unless they also work a job from home

and pay into Social Security, she (or he) is out of the Social Security system. Later, if it is necessary to remain at home to care for aging parents or in-laws, the worker is again outside the system unless she works from home and pays into the system.

Taking a common example, if you graduated from college at age 22 and spent ten years raising your family and then returned to work and retired at 62, you would have lost 5 years from the system not to mention retiring at a lower early retirement

benefit. If you also graduated at age 22, not having worked prior and then spent ten years raising your children while later spending from age 56 to 66 caring for aging parents without contributing as an employee into the Social Security system, you would have lost 11 years. Those years not in the system would be averaged into the total for 35 years as zero.

If you are “behind” in working 35 years and are in your 60’s, one way to catch up is to go back to work. An obvious way to

deal with the problem if you are not yet age 70 is to work at a job that pays into Social Security on your behalf even where the job is not the highest paying one. Although lower income for Social Security purposes can reduce overall benefits on retirement, it does not affect it as much as no income would. Obviously high income is best.

Another possibility is to review what half of your spouse’s benefit would be and determine whether this would be higher than benefits on your own work record.

Remember to adjust for age when you are taking the benefit. If you claim at age 62 it is less than at age 66, for example. The rules are complicated so get help if you need it.

Many Social Security resources are available online at www.socialsecurity.gov. Seek help where help is needed.

Janet Colliton, Esq. is a Certified Elder Law Attorney and limits her practice, to elder law, retirement and estate planning, Medicaid, Medicare, life care, and special needs at 790 East Market St., Suite 250, West Chester, Pa., 19382, 610-436-6674, colliton@ collitonlaw.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, cofounder of Life Transition Services, LLC, a service for families with long term care needs.

Tune in on Wednesdays at 4 p.m. to radio WCHE 1520, “50+ Planning Ahead,” with Janet Colliton, Colliton Elder Law Associates, and Phil McFadden, Home Instead Senior Care.