Everyone needs to plan, but women can face tougher retirement, Social Security issues, experts say

Editor's note: In June, Herald-Tribune reporter Rusty Murry attended a conference for journalists in Washington, D.C., where experts on several retirement-related issues shared their knowledge and offered connections with sources to bolster the conference information so that the journalist could share this vital information with readers. The following story is the first fruits of that conference to be shared with our readers. Watch for more information on these and other, related issues in future editions of the Herald-Tribune.

By Rusty Murry

Herald-Tribune

Baby boomers, the generation crazed by the British invasion, amazed by a moon landing and dazed by a half a century of self-indulgence, have at last grown up and become old enough to retire. For many of them, especially women, that means applying for Social Security benefits.

According to Eleanor Blayney, there was quite a bit of hype a couple of years ago when the first baby boomer officially applied for Social Security. Blayney was one of more than a dozen speakers to present information on retirement issues to a group of 20 professional journalists invited to a National Press Foundation conference in Washington, D.C., last week.

Blayney, a certified financial planner and author, representatives of the American Association of Retired Persons, the U.S. Treasury, the Social Security Administration, financial publications, Washington think-tanks and others delivered a broad spectrum of information to a cross section of American journalists brought to Washington from across the United States.

In her opening remarks to us, Blayney quoted that first retiring baby boomer as saying, "I want to tell you baby boomers out there to take the easy way out." The woman had elected to begin drawing her retirement benefits as soon as she turned 62, the earliest age a person becomes eligible for benefits. But according to Blayney and others, that may not be the wisest course of action.

In fact, it was agreed by all that Social Security benefits should be managed just as one would manage a 401(k) or any other retirement account. There are advantages and disadvantages to the system and an astute baby boomer should learn the nuances of the system before collecting.

The first thing to know is your monthly benefit amount. Benefits are based on a worker's best 35 years of earnings. That's unfortunate for women, because the average time in the work force for them is 27 years; the average for a man is 40 years, according to Blayney.

Another particular working against women is that they live longer. Those two factors mean that women have to make do for a longer retirement period on a smaller proportion of benefits. Women also suffer more from chronic, long term illness and often try to maintain a home during retirement.

Divorced and widowed women face the same prospects, and they do those things on a single income whereas men usually have two incomes to support their lifestyle.

The average age of widowhood in the United States is 56. Divorce ages vary, but a divorced woman nearing retirement age is not likely to re-marry whereas a man usually does so within two years, according to Blayney's co-presenter Peg Downey.

Downey said that even though the house is considered by most women to be an asset, it can be a financial liability. The combination of all these things makes it difficult for a woman living on Social Security alone to make ends meet.

The answer, according to the experts, is to maximize Social Security benefits.

This can be done in a number of different ways. If you expect to draw benefits from your own contributions to the system, you have to have worked a minimum of 10 years and you must have earned at least $4,480 in each of those years. If you have worked longer and made more, so much the better.

Women who are married can draw spousal benefits on their husband's earnings, but the benefit will only be half of his.

If the husband retires at 62, his benefit amount will be 25 percent less than if he had waited to retire at age 66 -- the full retirement age for those born between 1943 and 1954. Experts said the reduction for early retirement makes no difference in the total amount of benefits drawn because the reduced monthly benefit is made up for in the increased length of time one receives payments.

Women who are 62 can also draw benefits from a divorced spouse as long as they were married 10 years or more and even if there have been other marriages.

If a woman's ex-spouse is dead, she can draw survivors benefits beginning at age 60. Survivor benefits of 70 percent or more are possible depending on age. If a woman waits to re-marry after age 60 she may be able to continue drawing the ex-spousal benefits as well as spousal benefits of the current spouse.

The Social Security benefits plan is complex and there is no substitute for learning the system; nevertheless, there are other maneuvers retirees should be aware of before going to the local Social Security office.

Either spouse can file for and suspend benefits which allows the other, as long as they are 62 to begin drawing spousal benefits. This tactic is effective for couples where the husband continues to work and the wife has only accumulated a small benefit amount due to lack of work.

A woman, or a man for that matter, who is still working and is of full retirement age can get spousal benefits from the other's account and wait until their benefit amount is maximized to draw their own benefits.

What that means is that people can continue to work and draw spousal benefits until the age of 70, when the benefit amount, which increases about 8 percent per year, has reached its highest amount.

At that time, people can receive the most benefits from his or her own account and continue to work. There is no earnings limitation imposed on those of full retirement age.

That "take the easy way out" statement may not be the easy way out after all. It may be possible to quit working a little sooner, but is that going to let you have enough income to live the way you want to live.

As more and more baby boomers begin retiring, it's possible that the easy way out may be to take a long, hard look at how the Social Security system is structured and decide how to maximize the benefits it offers to the generation that finally grew up.