Social Security Income for Women
Social Security Income for Women👩🏽⚕️, and Why it is Important
Social Security income in retirement – do you know what that means? Well it can mean a LOT for your standard of living in your later years. And as women, we need to pay particular attention to our OWN earnings record, as well as combined spousal 👩🏾🤝👩🏼 and ex-spousal strategies for maximizing potential social security income in retirement. I also refer to ‘retirement years’ as our ‘later years’, as I prefer to say, because I can’t see myself ever retiring – I’m having too much fun helping my clients working towards achieving their unique long-term financial goals.
As a financial planner, I help my clients understand how their assets accumulated over their several decades of work/life experience may turn into their income plan in their later years. For some people, this may mean several decades of drawing down assets, while others hope to work well into their 70s and beyond which helps from an income/budgeting perspective.
But there are several very important aspects of Social Security that women should pay particular attention to. Let’s start by talking about how your earnings from income impact your predicted Social Security income.
How do I qualify for Social Security income?
The minimum earned income needed to qualify for a ‘credit’ is $1,510. So if you earn in excess of $6,040 in a year, you qualify for 4 credits for that year. Social Security requires that you’ve earned 40 credits, or otherwise, at least 10 years of income above $6,040 to qualify for SS on your own earnings record. For most women, even if you take time off to raise a family, achieving at least 10 years of a work record is not a problem.
When can I ‘claim’ my benefits, meaning, when can I actually see the money?💵
When can you ‘claim’ your Social Security benefit, or rather, when can you start receiving income from the Social Security Administration? I’m not going to list all the brackets, but basically, if you’re born after 1960, your earliest claiming age is 67. And it does not make sense to wait longer than when you are 70 years old.
This should NOT be confused with your Medicare claiming age, which is 65. I won’t elaborate on that here, but you should know that you have 2 important ages to look out for – 65 for Medicare and then what is known as your Full Retirement Age for Social Security income claiming.
Ok, so we know that we need at least 10 years of work experience to qualify for some amount of Social Security income, now let’s talk about what we need to know to improve our chances of achieving a higher social security income when we do claim.
How do I improve 💪🏽 my Social Security income potential?
The maximum taxable earnings (where social security taxes are withheld) is $147,000/year. I believe it should be our goal of achieving at least that income, in as many years as possible. This is often feasible with my female executives, especially those in tech or biotech, but this is not as often the case with my female small business owner clients.
As a small business owner, we often try to maximize our expenses, thereby minimizing our business income and thus taxes we owe. However, this may not always be the best strategy for our overall personal financial plan, because as we decrease our recognized income, we’re also decreasing what that income may have translated to in terms of social security income potential down the road.
I typically recommend that small business owners establish their Board of Advisors as soon as possible – their board should consist of a bookkeeper, accountant, attorney, and financial planner. Your Board can then work together to help you understand your alternative solutions to recognizing your business income and the impacts on your long-term personal financial goals.
🧐 How do I know what my potential Social Security income is?
Many people have no idea what their social security income record looks like, nor where to access it. The only way to see what your social security income is projected to be is to go online to set up your personal profile. From there, you can download your unique social security statement. If you do that, I’m happy to help you understand it, and discuss your options for improving your income potential.
If you’re married for at least one year, and still married, you will also be entitled to social security benefits on your spouse’s earning history. I encourage both spouses to request their own statement, so we can evaluate your claiming options together. And please note – your claiming decision is an important one, that should be evaluated with prudence and care, as your decision may result in larger lifetime payments.
What happens if I’m divorced? 💔
If you’ve been married for more than 10 years before you divorced, and have not remarried, you will be eligible to claim on your ex-spouse’s record. This is HUGE! Many people have more than 1 spouse in their lifetimes. However, if your ex-spouse had a higher social security earnings record, and your new potential spouse has a much smaller benefit, before you marry, you should be aware of your potential consequences in social security income in your later years.
If I’m a widow, how does that impact my benefits?
If you’re a widow, you may be eligible for widow survivor benefits, which would differ based on whether your spouse was of full retirement age or not. If you have minor or disable children in your care, they may also qualify for benefits. Please refer to www.SSA.gov for further info.
Now let’s turn our discussion towards Social Security claiming strategies. 🧮
As mentioned above, your social security income claiming decision should not be taken lightly. As a Certified Financial Planner ® I have tools at my disposal which help evaluate your options. I can develop break even scenarios at various ages where you may be inclined to file for benefits.
We also incorporate your other income potential, your assets, your expenses, as well as your health. For example, if your genetics tend towards longevity, it is especially important to know your options in terms of maximizing your income potential. An interesting site to refer to for predictions on your life expectancy is www.livingto100.com.The calculator on the site asks you 40 quick questions related to your health and family history, and takes about 10 minutes to complete.
What is a Cost of Living increase ⬆️ (COLA) and why is it important?
Every year, the Social Security administration determines the cost of living adjustment (COLA) increase in benefits for the following year. This year, the adjustment is scheduled to be released October 13, 2022, and is predicted to be the largest adjustment to benefits in 4 decades! This will be welcomed by all recipients who are dealing with high rates of inflation currently (8.3% for the CPI – refer to the Bureau of Labor Statistics www.bls.gov and my prior blog on inflation for more info).
What do I do if I don’t think Social Security income will pay out when I qualify for it?
There are many ways we can improve the funding of the Social Security Trust fund. As I mentioned before, we have social security taxes, included in FICA (Federal Insurance Contributions Act) on up to $147,000 of income (in 2022). If Congress increased the maximum taxable earnings above $147,000 or increased the rate (currently 6.2% for employer funding – or 12.4% if you’re self-employed), this has the potential to go a long way. The point being that there are many options to improve Social Security Trust funds.
How about taxes on Social Security income?
It is true, that if you are receiving social security income while still earning income, you may owe taxes on your Social Security income. However, I always recommend working with a financial planner to understand your situation, AND to take into account the non-monetary benefits of working in your later years (social, health, and brain-benefits, for example). For more info, consult the Social Security Administration.
🔚 In conclusion, your Social Security income is an important part of your overall financial plan, and everyone, especially women, should understand how it works.
In summary, your own personal social security earnings record is extremely important to review annually, as well as to know what role it will play in your long-term financial future. I’m happy to review yours with you, and help you understand your options moving forward.
Please reach out today to 📲schedule time with me.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.