Any worker who delays claiming Social Security receives a larger monthly benefit due to the actuarial adjustment. Some claimants – particularly women, who are more likely to take time out of the labor force early in their careers – can further increase their benefits if the extra years of work raise their career average earnings by displacing lower-earning years. This study uses the Health and Retirement Study linked to earnings records to quantify the impact of women’s late-career earnings on Social Security benefits relative to men’s. It also compares the impact on women, depending on their marital status and education.
The paper found that:
- Most workers of both genders are able to raise their Social Security retirement benefits at least a little, but women do so in large part by replacing zero-earning years: nearly half of women had a year with zero earnings in their top 35 years of earnings.
- The average gain in Social Security retirement benefits from working one additional year raises women’s monthly benefits by 8.6 percent – 7 percent is from the actuarial adjustment and an additional 1.6 percent is from late-career earnings. Men’s benefits increase by less – 7.8 percent – because they have fewer low-earning years to replace.
- 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.
- 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.
The policy implications of the findings are:
- 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.
- Because most workers – and especially women – have low-earning years to replace, efforts to further increase the retirement age are likely to increase Social Security benefits by increasing workers’ career average earnings.