Did you realize that your Social Security benefits are based on the highest inflation-adjusted 35 years of your income? To maximize your benefits, it's important that you have 35 years of a solid wage history. A zero-earnings year or two can cause your benefits to drop significantly.

A recent study by the Center for Retirement Research at Boston College discovered that women are three times as likely as men are to have at least one zero-earnings year among their top 35 years of earnings. Combine this with typically lower wages for women compared to men, and women have a powerful reason to work more years and postpone retirement and Social Security claims.

Stepping out of the workforce closer to retirement age aggravates the problem, since peak earning years are usually clustered toward the end of a career. In addition, it can be more difficult to find a comparable job as you approach retirement age – age discrimination aside, most employers will prefer investing the training and time in employees that will stay for a longer period of time.

Because women tend to live longer than men and make less money on average, they are also more dependent on Social Security – making it even more important to consider working longer to fill in any gaps in the income profile. Prolonging the working years also allows greater contributions to 401(k) plans and other employment-based retirement plans, further reducing dependence on Social Security.

According to the Boston College study, working a single additional year raises women's Social Security benefits by an average of 8.6%. Men benefit from working longer as well, but only by 7.8% on average – mostly because men have fewer zero-income or low-income years to overcome.

Delaying Social Security benefits beyond the initial eligibility age of 62 has a profound effect on women's benefits, regardless of any weak-income years. Waiting until age 70 to draw Social Security increases women's average benefits by 88% over drawing at age 62. (Men receive an 82% boost by doing the same.)

How much longer will you have to work to fill in zero/low income year gaps? Start by checking your reported earnings history. By signing up for a "my Social Security" account, you can see your annual earnings history and receive an estimate of your benefits based on your current history (assuming similar earnings for the rest of your career).

Look for any potential errors in income – mistakes in reporting can happen, and without checking, you would never realize it until you began to draw lower-than-expected benefits. Contact your local Social Security office for directions on how to correct any mistakes that you find.

Assuming all years are reported correctly, look over how many years of significant income you have to recover to reach 35 years. Don't be thrown by low numbers in the early years, since the benefit calculation is indexed for inflation. The Social Security Administration provides a worksheet for calculating indexed income, allowing you to clearly see the weakest income years to replace.

If working past age 62 sounds unappealing, consider a part-time position. Even working part-time to replace a zero-income year can have a significant impact.

Of course, every working woman has the right to leave the workforce and/or retire whenever she chooses and for whatever reason she chooses. However, it is important to understand that the financial aspects go beyond short-term paychecks. Social Security benefits, retirement savings, insurance coverage – these and other long-term financial factors must be considered in your decision.

Leaving the workforce may be the right decision for you, but make sure you have your financial bases covered – and if that means rejoining and working beyond normal retirement age, be prepared to do so.

Let the free Retirement Planner by MoneyTips help you calculate when you can retire without jeopardizing your lifestyle.


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