The US Department of Labor estimates that almost 90% of women will end up solely responsible for their financial well being. Given that women tend to earn less than men over their lifetimes to begin with, and may spend a good deal of time out of the workforce to care for families, women facing retirement may have fewer retirement resources, maximizing Social Security benefits available is critical.
The first thing for women (and men for that matter) to understand is how Social Security benefits are calculated in the first place. To be eligible for Social Security, you need to have been employed in a job that participates in the Social Security system for about 10 years. The benefit amount is calculated based on your highest 35 years of earnings, indexed for wage increases over the years. If you haven’t worked for 35 years, years you were out of the workforce will count as zero, and naturally bring the average down. On the other end, earnings are capped at an amount determined annually, and earnings only count up to that amount, no matter how high they may be. In 2010 that cap is $106,800. Those 35 years of earnings are then converted to a monthly amount, to come up with your “average indexed monthly earnings,” or AIME. That number then goes through a calculation to come up with your monthly benefit amount, or “primary insurance amount,” PIA. Obviously, if you have several years of zero or low earnings, that is going to bring down your PIA. One way to increase your benefit, if you are now earning a higher wage is to stay in the workforce long enough to replace those years with your current higher earnings. This is especially important for a never married woman.