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Practical Planning Tip: Women and Wealth - Social Security Credits and Retirement Assets

March 25, 2024

Today we’re going to continue our discussion on women & wealth. Since it is Women’s history month, The videos through the end of March will be on this topic. The topic I want to discuss today is Social Security Credits & Retirement assets for women.

First, Social Security credits: Women represent over 50% of Social Security beneficiaries in their 60s and 70% in their 90s. Overall, they make up 96% of Social Security survivor beneficiaries. However, time away from work, given the fact that women tend to leave the workforce more than men, can cause them to earn fewer credits toward Social Security benefits. In fact, in 2015, the average annual Social Security retirement benefit for women was $14,184 versus around $18,000 for men.

This may require for more intentional PLANNING with social security such as delaying when you claim benefits. Perhaps considering a SPIA, which is a Single Premium Immediate Annuity may be a practical solution for a small portion of their retirement assets. I am not the biggest annuity enthusiast, but the SPIA has been a worthwhile solution in certain scenarios.

Related to the previous point about fewer social security credits, let’s discuss Retirement assets:Studies have shown that women have nearly 50% less retirement savings than men. One cause is that women miss out on contributing to company 401(k) plans and the matching opportunities while they’re out of the workforce. Another reason for the disparity may be attributable to the gender wage gap, which is the difference between the median annual pay for women and men who work full time and year-round. The wage differential is the result of occupational segregation, bias against working mothers, and direct pay discrimination. In some high paying jobs, women collectively are receiving billions less than their male counterparts. For example, women physicians are paid $19 billion less annually than men in the same occupation. There’s no doubt that receiving 25% to 30% less pay in some professions can impact cash flow and, in turn, retirement savings.

Financial advisors are tasked with crafting a plan to tackle these challenges for both the accumulation and decumulation phases of retirement planning. Some approaches may be related to lifestyle, investments, or cash flow strategies. These include delaying retirement or working part time while in retirement, planning for a worst-case rates of return scenario, diversifying away from volatile investments at certain stages of retirement, or continuing to save while already in retirement. Exploring all these options in a proactive way is imperative for many women to secure their financial future.

Another option is for women to be more AGRESSIVE with their investments and maintain a higher than average savings rate EARLY in their career. This way if they experience wage discrimination or need to take extended leaves of absence from the workforce to take care and raise their family, the high savings rate and aggressive portfolio may help make up for this shortfall in assets.


You can WATCH the full video here.