13 Things Women in Their 50s Need To Know About Social Security & Retirement Planning
Written by
Gabrielle Olya
Edited by
Laura Bogart
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Women in their 50s are now approaching retirement age, but many are not financially prepared for this phase of life. According to a recent AARP study, 64% of women in their 50s say they’re less financially secure than they expected to be, and 59% are not confident they will have enough money to retire at an age they’d prefer.
The good news is that with the proper planning — including an optimized strategy for collecting Social Security benefits — women in their 50s can get on track for a financially secure retirement. In this “Financially Savvy Female” column, we’re chatting with Lisa Jones, wealth and retirement plan advisor at Prime Capital Financial, about the specific financial strategies women over 50 should consider to address their retirement concerns.
What should every woman in her 50s know about Social Security that they may not realize?
Every woman should know that Social Security alone isn’t enough to secure their future retirement and generally should not be relied upon for more than 40% of their retirement income.
They should understand that Social Security may not be so secure. Cuts to retirees’ incomes are imminent unless changes are made. The Social Security Administration anticipates that in 2033, the program can only continue with 79% of the benefits that are currently being paid.
Women should understand that their Social Security will most likely be taxable in retirement. Unless your income in 2024 is under $25,000 (or $32,000 for joint filers), 50% to 85% of the benefits you receive from Social Security will be taxed during retirement.
Women should know that if they were married for 10 years or more and divorced, they may be eligible for benefits based on an ex-spouse’s work record. Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration.
Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex’s record if you have been divorced for at least two years.
Ex-spouses can also take a survivor benefit if their ex has died first, and like any survivor benefit, it will be worth 100% of what the ex-spouse received. Lastly, if you’ve had multiple marriages that lasted at least 10 years, you may claim the highest of the eligible benefits.
What advice do you have when it comes to making decisions around their benefits?
We have found that women, in particular, should be creating a plan for their Social Security benefits starting in their 50s. Although you can collect Social Security as soon as you turn 62, taking the benefits before the full retirement age usually results in a permanent reduction of as much as 25% of your benefit.
It’s also important to note that for some married couples, there is a potential problem with Social Security that they may not have known. When there are two Social Security checks coming in, the smaller one stops if one spouse passes away before the other. If you haven’t fully planned for this, it could change your retirement outlook. It’s important to work with a financial advisor to make sure both spouses will have adequate income in the event of an unexpected death of one of them during retirement.
Women should never forget to plan for longevity risk. Remember, retirement could be longer than we think. About 1 out of every 3 65-year-olds today will live until at least age 90, and 1 out of 7 will live until at least age 95, according to the Social Security Administration.
Social Security benefits last as long as you live and can provide valuable protection against the possibility of outliving savings and other sources of retirement income. It’s important to choose a retirement age based on your circumstances, so you’ll have enough Social Security benefits to complement other sources of retirement income.
Over half of women in this age group are not confident they will have enough money to retire comfortably. Why?
Many of the women I work with today find that they are in charge of their financial lives either by choice or by chance. When I’ve asked my female clients the question, “Do you feel financially secure?,” a high percentage answer with a resounding “no.” This is gravely concerning to me as a financial advisor.
Even though women’s financial power is growing, too many of us are still leaving the financial decision making to others. This could prove economically crippling in the event of a divorce or death.
Most women grow up getting advice about how to dress and who to date, but few of us get financial education from our parents. Most have learned simply by observation. Women may have grown up with very little understanding of the way investment markets or retirement plans work, but the more they educate themselves on financial topics, the more confident and assertive they become regarding money decisions.
What financial strategies do you recommend to address this concern?
I have found that women tend to participate in employer-sponsored retirement plans more often than men, but many women don’t have a simple three-month emergency fund at their bank.
Of the women who do participate in an employer-sponsored retirement plan, few have bothered to rebalance their investment portfolios over time. While I commend women for participating in the retirement plan, I also stress that it’s equally important for them to regularly review how their portfolios are allocated to align with their retirement goals.
Amassing significant retirement savings and lifetime wealth is possible when you talk with a financial professional who recognizes some of the common mistakes female investors make, and who will counter them with wise approaches to saving and building wealth for retirement.
Women shouldn’t be afraid to “pay themselves first” in their employer’s retirement plan. They should also always be open to asking questions and learning. Once they’ve gained the knowledge, I also encourage them to pass that knowledge on to the next generation.
What other strategies would you recommend to optimize their retirement planning, even if they’re starting later than expected?
I have found in working with female clients over the last 30 years that women generally have a long list of to-dos that can feel never-ending. This leads them to leave taking care of themselves to the last on the list. The repercussions of that oversight can be damaging when it comes time to retire.
The rising cost of healthcare and long-term care are issues that many women overlook when planning for their retirement. Women live longer on average than men but have smaller retirement funds. Yet, a longer life doesn’t necessarily mean a more prepared life. Many times, women enter retirement with a smaller nest egg than men. They are typically out of the workforce longer, acting as a caregiver for children, grandchildren or aging parents. Those responsibilities can set women back when it comes to career advancement and retirement plan contributions. Women are also saving for retirement on a smaller income overall due to a persistent earnings gap.
My tips for combatting these issues are:
1) Start saving now. You can create a plan that will address your current and future expenses. By saving and planning now, you can make up for any healthcare budget gaps in your current retirement plan. Work with an advisor who understands the challenges that women face in saving for retirement.
2) Take a look at your existing insurance policy coverages and determine if they will accommodate your needs years down the road. If they don’t, take a look at other plans and options as soon as possible while you are healthy.
3) Consider advance care planning and participate in healthcare-related conversations with your family to address concerns before a crisis hits. Speak with loved ones about your wishes and complete any legal documents — advance directives, living will, durable power of attorney, just to name a few.
Think about appointing a healthcare proxy or decision maker while you’re still mentally competent. Depending on your health, you might want to look into hybrid long-term care insurance, which covers care if you need it and provides other benefits if you don’t.
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