Social Security Cuts Are on the Table: How a Drop in Benefits Will Impact Men Vs Women

The one near-certainty about Social Security is that it will have less funding in about a decade than it does now. The program’s Old Age and Survivors Insurance (OASI) Trust Fund is expected to run out of money as early as 2032 or 2033, after which Social Security will be solely reliant on payroll taxes for funding — and those taxes only cover about 77% of current benefits.

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To address the problem, some lawmakers have proposed cutting Social Security benefits. If that happens, women will likely feel a bigger impact than men. The reason is that women already earn lower benefits, and cuts will only magnify the disparity.

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As of Dec. 31, 2021 — the most recent data available — the average Social Security payment for all retirees was $1,658.03 a month, according to the Social Security Administration. For men, the overall average was $1,838.08. For women, the average was $1,483.75 — a difference of $354.33 per month. Multiplied over the course of a year, that adds up to about $4,252. When you multiply it by a 25-year retirement, the difference is more than $106,000.

Men get higher average Social Security payments across all age groups — from age 62, when you first qualify for benefits, to 100 years old and beyond. There’s no mystery as to why. Social Security benefits are based on income during your 35 highest-earning years — and men have historically earned more than women, even when they worked the same jobs. Higher earnings mean higher Social Security payments.

What’s more, when you drop out of the workforce for a substantial number of years, those zero-income years are factored into the benefit calculation, which shrinks checks even more. Traditionally, women have dropped out of the workforce much more frequently than men to raise children, which means they miss out on key earning years that contribute to their eventual Social Security benefit.

Although differences in gender pay and family roles have narrowed in recent decades, there’s still a disparity when it comes to income and career expectations. This means that on average, women still in the workforce will likely get smaller Social Security benefits than their male counterparts when they retire, making them more vulnerable to benefit cuts.

Women could also feel a bigger impact should lawmakers succeed in raising Social Security’s full retirement age. In June, the 176-member House Republican Study Committee (RSC) approved a fiscal blueprint that would gradually increase the FRA to 69 years old for seniors who turn 62 in 2033. The current full retirement age is 66 or 67, depending on your birth year. For all Americans born in 1960 or later, the FRA is 67.

The FRA is the age at which you are entitled to the full Social Security benefits you are due. If you claim benefits before full retirement age, your monthly payment is lower. If you can claim benefits after your FRA, your payment is higher.

So why would women be more affected than men by a higher FRA? Simple: women tend to retire earlier than men. As of 2021, the average retirement age was 65 for men and 62 for women, according to Forbes. The earlier you retire, the lower your benefit. If the full retirement age is raised, then the monthly payment gap will be even more pronounced.

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This article originally appeared on Social Security Cuts Are on the Table: How a Drop in Benefits Will Impact Men Vs Women

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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