Bad Retirement Advice Could Cheat You Out of Social Security

Libby Kane

Women live, on average, five years longer than men, so they need to prep their retirement accounts accordingly.

Today, the average American white male can expect to live 76.2 years, whereas the average American white female can look forward to 80.9 years. That means that the average female needs to save enough for the extra five-ish years.

Unfortunately, a new study from the Wharton Retirement Research Center finds that married women may be getting flawed advice about Social Security from their financial advisors, who neglect to take the difference in lifespan between the sexes into account when consulting with clients.

The way it works is this: People can start claiming Social Security benefits between 62 and age 70. If you start receiving the money sooner, the amount each month is smaller, but if you hold out, each month’s check is larger and you end up with more money overall. Married women who don’t work can receive benefits based on their husband’s employment, and here is where the bad advice comes in.

The researchers, who surveyed 400 financial advisors, found that most did not take into account the wives’ longer lives in a hypothetical scenario in which a 62-year-old man wants to retire right away but has, with his wife, saved $800,000. Only one in five advisers suggested he put off taking Social Security as long as possible even though the couple had no need for the Social Security money right away.

While we never recommend relying on Social Security in retirement, that advice could cost the woman a lot in Social Security income should she become widowed, because she will have already gotten the bulk of their benefits and won’t get as much per month after her husband’s death.

Currently, slightly more than half of retired women depend on Social Security to supply three-quarters of their income, according to the Employee Benefits Research Institute.

These findings are just another point in favor of educating yourself as much as possible when it comes to your needs surrounding retirement. We have an entire section of the Knowledge Center dedicated to retirement, as well as a checklist to get you started saving for retirement. Have questions? Start there.

  • Lorilu

    Many, if not most, baby-boom era women worked for some portion of their lives. You need only 40 quarters of work under Social Security to earn a benefit. Women who need to retire should consider taking their benefit at 62 or later, and having their husband claim a restricted benefit on her record at 66. He can then let his benefit grow by delaying his benefit. The remaining spouse, husband or wife, will always collect the larger benefit.