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Four Things Women Need toKnow about Social Security

June 24, 2020

Ever since a legal secretary named Ida May Fullerreceived the first retirement benefit check in 1940,women have been counting on Social Security toprovide much-needed retirement income. SocialSecurity provides other important benefits too,including disability and survivor benefits that can helpyou and your family members.

1. How does Social Security protectyou and your family?When you work and pay Social Security taxes, you'repaying for three types of benefits: retirement,disability, and survivor benefits.

Retirement benefits

Retirement benefits are the cornerstone of the SocialSecurity program. According to the Social SecurityAdministration (SSA), because women are less oftencovered by retirement plans and live longer onaverage than men, they are typically more dependenton Social Security retirement benefits.* Even if othersources of retirement income are exhausted, SocialSecurity retirement benefits can't be outlived. Manywomen qualify for benefits based on their own workrecord, but if you're married, you may also qualifybased on your spouse's work record.

Disability benefits

During your working years, you may suffer a seriousillness or injury that prevents you from earning aliving, potentially putting you and your family atfinancial risk. But if you qualify for Social Security onyour earnings record, you may be able to get monthlydisability benefits. You must have worked longenough in recent years, have a disability that isexpected to last at least a year or result in death, andmeet other requirements. If you're receiving disabilitybenefits, certain family members (such as yourdependent children) may also be able to collectbenefits based on your work record. Becauseeligibility requirements are strict, Social Security is nota substitute for other types of disability insurance, butit can provide basic income protection.

Survivor benefits

You probably know the value of having life insuranceto financially protect your family, but did you knowthat Social Security offers valuable income protectionas well? If you're qualified for Social Security at yourdeath, your surviving spouse (or ex-spouse), yourunmarried dependent children, or your dependentparents may be eligible for benefits based on yourearnings record. You also have survivor protection ifyou're married and your covered spouse dies andyou're at least age 60 (or at least age 50 if you'redisabled), or at any age if you're caring for yourcovered child who is younger than age 16 or disabled.

2. How do you qualify for benefits?When you work in a job where you pay SocialSecurity taxes or self-employment taxes, you earncredits (up to four per year, depending on yourearnings) that enable you to qualify for Social Securitybenefits. In 2020, you earn one credit for each $1,410of wages or self-employment income. The number ofcredits you need to qualify depends on your age andthe benefit type.

• For retirement benefits, you generally need tohave earned at least 40 credits (10 years of work).However, you may also qualify for spousal benefitsbased on your spouse's work history if you haven'tworked long enough to qualify on your own, or ifthe spousal benefit is greater than the benefityou've earned on your own work record.

• For disability benefits (if you're disabled at age 31or older), you must have earned at least 20 creditsin the 10 years just before you became disabled(different rules apply if you're younger).

• For survivor benefits for your family members, youneed up to 40 credits (10 years of work), but undera special rule, if you've worked for only one andone-half years in the three years just before yourdeath, benefits can be paid to your children andyour spouse who is caring for them.

Whether you work full-time, part-time, or are a

For more informationabout Social Securitybenefits, visit the SocialSecurity Administrationwebsite at ssa.gov, orcall (800) 772-1213 tospeak with arepresentative. You mayalso call or visit yourlocal Social Securityoffice.

* Social SecurityAdministrationPublication — What EveryWoman Should Know,October 2018

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

Securities and advisory services offered through Commonwealth Financial Network member www.FINRA.org/www.SIPC.org , a RegisteredInvestment Adviser. Fixed insurance products and services offered through CES Insurance Agency. This material has been provided for generalinformational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding theirindividual situations.

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stay-at-home spouse, parent, or caregiver, it'simportant to be aware of these rules and tounderstand how time spent in and out of theworkforce might affect your entitlement to SocialSecurity.

3. What will your retirement benefitbe?Your Social Security retirement benefit is based onthe number of years you've worked and the amountyou've earned. Your benefit is calculated using aformula that takes into account your 35 highestearnings years. If you earned little or nothing inseveral of those years, it may be to your advantage towork as long as possible, because you may have theopportunity to replace a year of lower earnings with ayear of higher earnings, potentially resulting in ahigher retirement benefit.

Your benefit will also be affected by your age at thetime you begin receiving benefits. If you were born in1943 or later, full retirement age ranges from 66 to67, depending on the year you were born. Your fullretirement age is the age at which you can apply foran unreduced retirement benefit.

However, you can choose to receive benefits as earlyas age 62, if you're willing to receive a reducedbenefit. At age 62, your benefit will be 25% to 30%less than at full retirement age (this reduction ispermanent). On the other hand, you can get a higherpayout by delaying retirement past your full retirementage, up to age 70. If you were born in 1943 or later,your benefit will increase by 8% for each year youdelay retirement.

For example, the following chart shows how much anestimated monthly benefit at a full retirement age of67 would be worth if you started benefits early at age62 (your monthly benefit is reduced by 30%), and howmuch it would be worth if you waited until age 70(your monthly benefit is increased by 24%).

Benefit at age67

Benefit at age62

Benefit at age70

$1,000 $700 $1,240

$1,200 $840 $1,488

$1,400 $980 $1,736

$1,600 $1,120 $1,984

$1,800 $1,260 $2,232

What if you're married and qualify for spousalretirement benefits based on your spouse's earningsrecord? In this case, your benefit at full retirement agewill generally be equal to 50% of your spouse'sbenefit at full retirement age (subject to adjustmentsfor early and late retirement). If you're eligible forbenefits on both your record and your spouse's, you'llgenerally receive the higher benefit amount.

One easy way to estimate your benefit based on yourearnings record is to use the Retirement Estimatoravailable on the SSA website. You can also visit theSSA website to sign up for a my Social Securityaccount so that you can view your personalizedSocial Security Statement. This statement gives youaccess to detailed information about your earningshistory and estimates for disability, survivor, andretirement benefits.

4. When should you begin receivingretirement benefits?Should you begin receiving benefits early and receivesmaller payments over a longer period of time, or waituntil your full retirement age or later and receivelarger benefits over a shorter period of time? There'sno "right" answer. It's an individual decision that mustbe based on many factors, including other sources ofretirement income, your marital status, whether youplan to continue working, your life expectancy, andyour tax picture.

As a woman, you should pay close attention to howmuch retirement income Social Security will provide,because you may need to make your retirementdollars stretch over a long period of time. If there's alarge gap between your projected expenses and youranticipated income, waiting a few years to retire andstart collecting a larger Social Security benefit mayimprove your financial outlook. What's more, thelonger you stay in the workforce, the greater theamount of money you will earn and have available toput into your overall retirement savings. Another plusis that Social Security's annual cost-of-livingincreases are calculated using your initial year'sbenefits as a base — the higher the base, the greateryour annual increase, something that can help youmaintain your standard of living throughout manyyears of retirement.

This is just an overview of Social Security. There's alot to learn about this program, and each person'ssituation is unique. Contact a Social Securityrepresentative if you have questions.

• Use the benefitcalculators availableon the Social Securitywebsite to estimateyour future retirement,disability, andsurvivor benefits

• Check your earningshistory regularly, andreport any namechanges right away tothe SSA so that yourearnings are recordedproperly

• No matter when youapply for SocialSecurity, you'll beeligible for Medicareat age 65, so makesure you contact theSSA three monthsbefore you turn 65 tosign up for Medicareeven if you plan toretire later

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