Advisers who specialize in working with women need to be knowledgeable about Social Security strategies because women rely more heavily on this source of income than men, according to retirement expert Mary Beth Franklin.
"Women tend to live longer than men, they spend more time in retirement and often do so with less savings because of their lower lifetime earnings," she told about 240 attendees at the InvestmentNews Women Adviser Summit in San Francisco Tuesday. "They also are more likely to live alone in old age due to widowhood, divorce or never being married."
Women represent more than half of all Social Security beneficiaries aged 62 and older and two-thirds of beneficiaries over the age of 85, Ms. Franklin said.
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She offered advisers tips on how to maximize benefits based on clients' marital status, whether they're married, divorced or widowed.
For instance, divorced individuals who were married at least 10 years and are single may be able to claim Social Security benefits on their former spouse's earnings record, depending on their date of birth.
"So if the marriage is falling apart in years eight and nine, string out the paperwork," Ms. Franklin said, stressing that the client needs to have been married for at least 10 years.
She also offered detailed answers on a few specific questions about Social Security benefits.
Liz Skinner: What's so important about the year 1954 when it comes to Social Security claiming?
Mary Beth Franklin: People who were born on or before Jan. 1, 1954, have special rights when it comes to claiming Social Security benefits assuming they are either married or are an eligible divorced spouse who was married at least 10 years.
Those people, when they reach their full retirement age of 66, can say to Social Security, 'Don't pay me my benefits, let them keep growing by 8% a year up until age 70. But in the meantime, pay me as a spouse. Pay me half of my husband's or ex-husband's full retirement age benefit, while my own continue to grow.' People born after that date do not have that option.
LS: What about survivors?
MBF: Survivors have added benefits. If someone is entitled to their own retirement benefit on their own earnings record and they are also a widow, they may be entitled to two different pots of money: a retirement benefit and a survivor benefit. And they may be able to claim one type of benefit first and switch to the other later, and it does not matter which order.
They can do it however will benefit them. They might be able to claim their own reduced retirement benefit first, and then switch to a maximum survivor benefit at their full retirement age. That would work for women who tended to have a smaller benefit than their late husband.
Or if they are a lifetime career woman and they are widowed at a young age, they might want to collect their survivor benefit at their full retirement age and let their own retirement benefit continue to grow until age 70. For these people, it does not matter when they are born. Survivors are entitled to separate pots of money.
LS: How does Social Security interact with Medicare?
MBF: For retirees, you enroll in Medicare at 65 in most cases and at some point you collect Social Security. Your Medicare Part B that pays for doctor visits and outpatient services has a monthly premium that is deducted directly from your Social Security benefits. About 90% of retirees pay the standard monthly premium, which is currently $135.50 a month.
But depending on their income, many advisory firm clients pay a whole lot more for the same services, as much as $460 a month per person. It's very important for advisers to look at the income of their clients and try and figure out how to move some money into tax-free columns in the future, to ultimately reduce their income taxes, and perhaps their Medicare premiums.