Attention Women: You could work your whole life and never see a penny of your Social Security benefits! And that's the good news!
Alright, I'm being sensationalist. But if you're anything like me, discussions about the intricacies of Social Security can seem a bit boring, so I wanted to get your attention. Because - boring or not - it's an issue that will affect the rest of your life. And, yes, the above statement is actually true, in specific circumstances.
First, you may not see any of your Social Security benefits when you retire, if the benefits you have earned are less than 50 percent of the benefits your spouse has earned. That's because when a couple retires, they may each chose to receive their own, individually-earned benefits, or the lower-earning spouse may elect to receive 50 percent of the higher-earning spouse's benefits (called spousal benefits) instead of her own earned benefit. Since women generally earn less than men, and often take time out of the paid work force to raise children, it is quite possible that your earned benefit may be less than your spousal benefit.
You also may not see any of your benefits if your spouse dies when or before you retire. Under current law, when a spouse dies, the surviving spouse can chose to receive 100 percent of either her own earned benefits, or the deceased spouse's earned benefits (called survivor benefits). Again, since women's earnings are usually less than their husband's earnings, most women choose the survivor benefit rather than their own earned benefit.
This is not really as bad as it sounds however, because it entitles women who have never worked outside the home to receive at least a minimum level of benefits, and provides some recognition of their contribution to the family in their work as wives and mothers.
One more important fact regarding current law: When one spouse dies, the surviving spouse sees his or her benefits drop by one-third to one-half. A couple, as noted above, receives either 150 percent of one wage-earner's benefit (100 percent earned benefit plus a 50 percent spousal benefit), or the earned benefits of both spouses, whichever is greater. After the death of one of the couple, the survivor receives only one wage-earner's benefit (either her own or her spouse's, whichever is higher). This results in at least a one-third reduction in benefits, if the couple was receiving the 150 percent provided by spousal benefits, and up to a 50 percent drop, if their individually-earned benefits were equal. Unfortunately, the cost of living for the survivor is only reduced by about 20 to 25 percent - which explains, in part, why a report by the General Accounting Office shows that about 80 percent of widows now living in poverty were not poor before their husbands died.
Gee, that doesn't sound like a very good deal does it? But some of the proposals being floated to "save" Social Security could actually make matters worse for women.
Next Page: Privatizing Social Security.