Social Security benefits are particularly important to women, even when clients have seemingly sufficient retirement accounts.

You know the challenging situation: Women live longer, have lower incomes, pop in and out of the workforce, and end up with smaller Social Security payments.

In 2024, the average annual benefit for men was $25,000, compared with $19,850 for women — fully 20% less monthly income on average. Furthermore,

  • The majority of Social Security beneficiaries are women: 54% of recipients between ages 60 and 79; 67% of recipients in their 90s.
  • Social Security keeps 9.4 million women above the poverty line.
  • Forty-four percent of retired women receive 50% or more of their income from Social Security. 
March is Women’s History Month and no better time to recognize the situations that female clients may face. In light of recent changes in Social Security for those with a public pension, it will be helpful to have important conversations and share some good news.

1. Review each client’s most current Social Security statement.

Focus on the significant increases in monthly cash flow that come from waiting until full retirement age or longer.

Unfortunately, women are not waiting. The latest data from Social Security shows that 62% of women claim their benefit before full retirement age. And 29% claim at age 62, locking in the least amount of income possible.

In some cases, claiming early can be a good financial decision, or is necessary — but not to this extent. Help clients make better long-term decisions about this foundation of income in retirement.

2. Reach out to every female client drawing a public pension.

You’ve seen the whipsawing since the Social Security Fairness Act was signed into law in early January. First, the Social Security Administration said to expect adjustments in a year … now, checks should be arriving this month and next. But only if the situation is not complicated.

And only if Social Security knows that an individual client should be getting benefits.

Reach out to all clients receiving a public pension to make sure they filed for Social Security benefits. Many never applied because their pension wiped out spousal, ex-spousal or widow benefits.

They now need to file to get full monthly benefits going forward, and any available benefits retroactive to January 2024.

3. Let clients know what to expect.

The Government Pension Offset affects married individuals who draw a public pension. Advisors can provide a general estimate of the amount due back to spouses, former spouses or widows.

The offset reduces benefits by two-thirds. Using a simple example for a typical married couple where the wife was a career teacher or state employee with a public pension, and the husband qualified for Social Security, here’s the impact:

  • His original primary insurance amount: $2,400
  • Her maximum spousal benefit: $1,200 (50% of his PIA)
  • Her public pension: $3,000
  • Two-thirds of $3,000: $2,000 
The $2,000 reduction completely eliminated her spousal benefit.

After she applies for her spousal benefit, she will receive Social Security of $1,200 per month, with yearly cost-of-living adjustments. Plus, her retroactive benefit may be about $18,000, if eligible in January 2024.

4. Make sure to connect lots of dots during the discussion.

Importantly, remember to connect all the dots between Social Security and Medicare when talking about new benefits. Mention that the calculations are complicated, and clients should expect adjustments that may reduce monthly benefits, including:

  • Automatic deductions for Medicare Part B premiums plus any income-related monthly adjustment amounts for Parts B and D.
  • If younger than full retirement age, reductions for early filing.
  • If still working and under FRA, benefits may be clawed back by the earnings limit rules.
  • Benefits will likely be taxable. Clients may want to voluntarily withhold taxes.
Furthermore, if the Windfall Elimination Provision reduced her own earned benefit, the new benefit amount will be challenging to estimate. Her benefits will increase as the reduction is removed and COLAs applied, going back to the month she claimed.

This could be 10 or 20 years ago for some clients; it will be best to wait for Social Security to run the new numbers.

Marcia Mantell is the founder and president of Mantell Retirement Consulting Inc., a retirement business and education company supporting the financial services industry, advisors and their clients. 

NOT FOR REPRINT

© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.