Although they might not necessarily want to do so, women who postpone retirement and delay their claiming of Social Security not only boost their eventual benefits, but achieve a greater gain from the action than men who work past retirement age and claim benefits later.
That's according to a paper from the Center for Retirement Research at Boston College, which found that most workers of both genders can increase their Social Security retirement benefits at least a little by working longer and delaying claiming benefits, but women who do so are usually replacing zero-earning years, since they are more likely to have taken time off early in their careers.
The study used data from the Health and Retirement Study (HRS) linked to earnings records to quantify the impact of women's late-career earnings on Social Security benefits relative to men's. It found that nearly half of women had a year with zero earnings in their top 35 years of earnings.
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However, by delaying claiming benefits and remaining in the workforce longer, those women are substituting paid years of work for those zero-earning years—and the results are substantial.
The average gain in Social Security retirement benefits from working one additional year increases women's monthly benefits by 8.6 percent. Seven percent is from the actuarial adjustment and an additional 1.6 percent is from late-career earnings.
Men's benefits, on the other hand, increase by less—only 7.8 percent—because they have fewer low-earning years to replace.
The value of retirement benefits is based on workers' Average Indexed Monthly Earnings (AIME), which is the average of their highest 35 years of wage-inflation-indexed earnings (divided by 12).
The calculation for workers with fewer than 35 years of earnings includes zeroes, which are then replaced by those additional years of earnings for those who delay claiming benefits and continue to work.
Delaying claiming benefits from age 62 to 70, the study found, increases Social Security benefits by 76 percent for workers born in 1943–1954. That's from the actuarial adjustment, which is made to ensure that the expected present value of lifetime benefits for workers with average mortality varies little by claiming age.
The study said, "Women who delay retirement all the way to their 70th birthdays increase their benefits by 76 percent from the actuarial adjustment, and 12 percent from late-career earnings; this total increase of 88 percent compares to 82 percent for men."
Interestingly, the study also found that the gains from working until 70, and the amount attributable to higher earnings, are roughly equal for divorced and continually married women, and for better- and less-educated women.
When it comes to how these findings might affect policy, the study said, "Citing the 76 percent increase in benefits due to the actuarial adjustment sells short how much delayed claiming can increase Social Security income, especially among women."
It also pointed out that because most workers, particularly women, have years of low or zero earning that could be replaced by working longer, "efforts to further increase the retirement age are likely to increase Social Security benefits by increasing workers' career average earnings."
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