Your Financial Future: Financial planning a priority for women
Women face many more financial challenges than men. They usually live longer than men, and they often have lower lifetime earnings. Because of this longer life expectancy, they often have higher lifetime medical expenses. Women represent two-thirds of all nursing home patients.
Because of these facts, financial planning is probably more important for women. This planning must start early because decisions made in your early 60s can have a major impact in your 80s. Most men and women who are married have higher family income because there are often two incomes, which allows them to have a higher standard of living. This higher standard of living often leads to better health options. Financial planning needs to consider all aspects of financial life including Social Security (SS) and health care planning.
A couple needs to make SS decisions together and consider the long-term effects of those decisions. There are several ways you can receive SS benefits. First is on your own work record. You can claim SS starting at age 62, and you can delay making this decision up to age 70. For anyone born before 1954, full retirement age is 66. This is the age you would receive your full SS benefit. If you apply early, you receive less every month for the rest of your life.
For every year before you reach full retirement age, you give up 6½ percent per year. This lower monthly benefit means that you will also receive smaller cost of living increases. These claiming decisions are multiplied because they can have a big impact on spousal and survivor benefits. When someone passes away, living expenses do not cut in half. You still must heat the house, pay the taxes and many other expenses. One SS check will stop coming in. The good news is it will be the smallest one.
The amount of money you received from spousal or survivor’s benefits is determined from earlier decisions. Starting benefits at 62 can cost your spouse tens of thousands of dollars when they need it most. The greater the difference between spouses SS benefits, the more important the decisions are.
If you begin SS benefits after reaching full retirement age, 66 for people born before 1954, you get a delayed filing bonus of 8 percent extra for each year delayed up to age 70. While delayed credits do not affect spousal benefits, they do help survivor’s benefits.
Anyone who was 63 by Jan. 1 of this year and not yet collecting SS has an extra option that could be very valuable. That is the right to file a restricted application. This can allow you to collect some SS and still allow your own benefit to grow. Make sure to review your options with a knowledgeable advisor.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.