Widows getting cheated out of Social Security


By Ian Salisbury

Last Update: 5:09 PM ET Aug 23, 2012

Its no secret that women live longer than men. But a new study by the Wharton Schools Retirement Research Center suggests that some professional financial advisers neglect to take that fact into account when they tell clients how to time their Social Security benefits.

The mistake could cost women who outlive their husbandsand who might benefit from a significant monthly check into their 80s or 90s.

Slightly more than half of women 65 and older rely on Social Security for three-quarters of their income, according to the Employee Benefits Research Institute. Choosing when to start taking benefitsa decision that can be affected by factors like health, savings and other sources of incomeis complex even for pros.

While seniors can start receiving checks as early as age 62, doing so means theyll get less each month than they would if they waited until the maximum age of 70 to start taking distributions. Spouses that dont workusually women, in the baby boomer generation currently reaching retirement agealso receive benefits based on their partners earnings.

But womens longevity is not being taken into account in the calculus, the study found. At age 62, theres a lot you can do, says co-author Andrew Biggs, a former Social Security Administration official. You may have a big 401(k), you can go still go back to work. At 72, there are a lot fewer options.

The study, which posed questions about a number of specific scenarios to a group of about 400 professional financial advisers, suggests that many are tailoring their advice to the needs of the husband without thinking as carefully about the impact on the wife.

For instance, presented with a 62-year-old man in average health who wants to retire right away but has, together with his wife, saved $800,000, only one in five advisers suggested he put off taking Social Security as long as possible. The recommendations were made despite the fact that with such a large nest egg, the couple appeared to face little immediate need for cash and the decision would significantly crimp the womans survivor benefit should she become a widow.

The National Association of Personal Financial Advisors and the Financial Planning Association, two trade groups for advisers, didnt immediately respond to calls seeking input about the study.

Of course, while most financial advisers are men, the study doesnt prove that these conclusions were driven purely by chauvinism. A more charitable explanation might be that the advisers perceived the chief breadwinner in each scenario as their client.

Another, says Biggs, is that the educational materials provided by the government, while recently improved, havent historically done a good enough job of emphasizing the issue.

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