Two days ago, I was sitting on a bench overlooking the Atlantic Ocean watching sizable waves smash onto the sandy beach and talking to a recently retired friend about, no kidding, Social Security.
My friend is the sort of guy who pays attention to his finances, but as he was mapping out his retirement scenario before leaving his job, he wrestled withwhen to start taking Social Security benefits.
Your 'Full Retirement Age'
At 67, he was already past what Social Security calls "full retirement age," which is 66 for most boomers. (The size of your Social Security benefits are reduced if you claim them between 62 and your full retirement age; you’ll get just 75 percent by claiming at 62. The checks grow by 8 percent a year for every year you delay receiving the money between your full retirement age and age 70.)
(MORE: Women Get Bum Advice on Social Security)
When my friend called Social Security to ask what he should do, he was advised to “do the math.” So he did — and decided to sign up immediately.
I wish I’d asked him whether he considered the financial repercussions of this decision for his wife of roughly 40 years.
How Men's Claiming Decisions Hurt Women
Too often, men don’t — and their wives pay a price.
According to a study on Social Security claiming decisions of nearly 14,000 older couples by Federal Reserve Board economist Alice M. Henriques, most married men think solely of themselves when choosing the date they’ll start filing for Social Security benefits.
If they delayed receiving benefits, the men would provide their wives with more income if widowed. But Henriques found that husbands showed nearly “no response to the large incentives” for postponing their start date. As a result, she wrote, men are reducing their wives' lifetime benefits.
That's because many married women are still financially dependent on their husbands in their 60s and beyond, even though women have increasingly stormed the workplace, the gender wage gap is shrinking and more women are becoming savvy about money. Husbands typically work more years than their wives (due to their time off for maternity leave and child rearing) and earn more money. As a result, when it comes to Social Security, most married women end up relying on the program’s spousal and survivor benefits.
But here’s the tarnished gold in Henriques’ digging, in my opinion: Almost half of men claim Social Security benefits as soon as they are eligible – at 62. A quarter wait until age 63 - 65 and fewer than 5 percent start taking Social Security after turning 65, according to her research.
So how much money is left on the table as a result of early claiming?
Photo courtesy of chuckstock/Shutterstock.com
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