Although Social Security was never designed to sustain retirees’ living costs in its entirety, it has become a reliable source of income many Americans utilize to help bridge the gap between other sources of retirement income and total expenses, especially for women.
According to the Social Security Administration, women make up 56% of the 37.8 million beneficiaries aged 65 and older. Why? Women enjoy longer lifespans than men and have less saved for retirement due to the gender wage gap and years spent outside the workforce in caretaking roles. As a result, women between the ages of 60 and 64 are estimated to have $40K less in retirement savings than their male counterparts, making social security benefits a more integral part of their retirement plan.
Maximizing social security benefits, then, should be a retirement planning factor women take care not to overlook.
- Should I Continue Working to Make Up for Years Out of the Workforce?
Social security benefits are based on lifetime earnings and are calculated using your average indexed monthly earnings during the thirty-five year period when you earned the most income. However, since many women leave the workforce to raise their own children or help care for aging parents, they may not have had an opportunity to log a full thirty-five years or, if they did, inevitably earned less over that duration due to the gender wage gap (which still exists today).
One option women can exercise is to continue working past their initial projected retirement date in order to (a) inflate the income average that will be used to calculate their benefits or (b) avoid having zeros factored in for the number of years under 35 that they did not pay into the system.
Social security benefits are considered earned benefits, so if you don’t work for a full 35 years, and subsequently do not pay into the system for a full 35 years, you’ll have zeros factored into your calculation for the number of years you did not show an income. Since working full-time at an older age is not always feasible or desirable, some women choose to take on part-time work from home in order to avoid having zeros factored into their lifetime benefit calculation.