Women have a more difficult time saving for retirement than men do. Lower median incomes and longer life expectancies form a dangerous combination that leaves many women struggling to get by in their senior years. Many find the idea of a guaranteed monthly Social Security check comforting, but they seem to have a little too much faith in the support Social Security will provide.
Approximately 32% of women surveyed by Transamerica said they expect Social Security to be their primary source of income in retirement. Twenty-four percent of men said the same. But that's a dangerous plan, especially for women. I explain why below.
Why Social Security shouldn't be your primary source of retirement income
Social Security was intended to supplement about 40% of the average worker's preretirement income, though the Social Security Administration gives no guidelines as to what average earnings are. The average Social Security benefit as of October 2019 is $1,430.16, and the typical household headed by an adult 65 or older spends about $50,860 per year, according to the latest Bureau of Labor Statistics Consumer Expenditure Survey. Based on this data, the average Social Security benefit will only cover about 33.7% of the average retiree's expenses. That leaves you with nearly two-thirds of your expenses that you must cover on your own.
For women, it's even more complicated because they typically earn less than men, and they're more likely to leave the workforce, either temporarily or permanently, following the birth of a child or to care for a sick family member. Social Security checks are based on your average monthly earnings over your 35 highest-earning years (adjusted for inflation), so lower incomes and fewer working years means their checks will likely be smaller than their male counterparts' checks. When you haven't worked for at least 35 years, the Social Security Administration includes zeroes in your calculation, which brings down your average considerably, and women who've spent less than 10 years in the workforce aren't eligible for benefits based on their own work record at all.
So it's possible that some women's Social Security checks might not even cover a third of their expenses. If those women don't have adequate personal retirement savings, they might be unable to support themselves.
How women can boost their Social Security checks and ensure a comfortable retirement
Women can still count on some money from Social Security, whether they're retiring next year or decades from now, but they must understand how much they can actually expect from the program and the steps they can take to increase their benefits.
The most important of these is to work for at least 35 years. These years do not have to be consecutive. Working even longer is better if you can, because then your lower-earning years get replaced by higher-earning years in your benefit calculation. You should also do what you can to increase your income today, because this will increase your average monthly income that the Social Security Administration uses to calculate your benefits.
Check your Social Security earnings record at least once per year to verify that the information there is accurate. You can access yours by creating a my Social Security account. This will also give you estimates of your benefits based on your current work record. Errors in your earnings record could cost you benefits that are rightfully yours. Compare your earnings record for each year against your tax returns for that year, and don't throw out your tax returns until you're sure your earnings record is correct. If you notice any errors, notify the Social Security Administration and provide any documents you have to prove your correct earnings for the year.
Delaying claiming Social Security benefits may also be wise for some women, though this means drawing more heavily upon personal savings in the early years of retirement. You may start collecting Social Security as early as 62, but you must wait until your full retirement age (FRA) -- 66 or 67 -- to receive the full benefit you're entitled to based on your work record. And starting early will cost you. You'll only get 70% of your scheduled benefit per check if you begin at 62 and your FRA is 67 or 75% if your FRA is 66. But you can also delay benefits past your FRA, and your checks increase until you hit the maximum benefit at 70. This is 124% of your scheduled benefit per check if your FRA is 67 or 132% if your FRA is 66.
Women who anticipate long lives will likely get more money from Social Security overall if they delay benefits until their FRA or beyond, but not everyone is able to do this. If you can't for financial reasons, try delaying claiming benefits as long as you can. Every month you wait to start claiming will increase your checks, at least until you get to 70.
All of these techniques can help increase your Social Security benefits, but you still need substantial personal savings to see you through retirement. Prioritize retirement savings today and increase how much you put away for your future every time you get a raise. You might have to make some changes to your current budget to free up more cash for saving. It's not fun, but when you reach retirement, you'll be glad you were thinking ahead.