29 July 2008

Spousal Social Security: Bitter Boomer Women

My friend who retired from Social Security confirms: The most bitter comments he ever heard were from women understanding for the first time that their "spousal benefit" was higher than the one they earned on their own. Technically, it's the woman's own benefit that is paid first, but a combination formula based on 1/2 of the husband's Social Security benefit sometimes boosts pay to more as a spouse than as a worker.

"So, I worked for nothing." That's the common lament although, of course, the worker had income during the years of qualifying for benefits. My friend has suggested to me that there is little comfort to give a person who is realizing that low-income employment has limited reward in retirement. For the woman in this situation, 1/2 of her husband's benefit would be available to her even if she never worked outside the home.

Some Strategy of Interest: A Social Security "Electronic Booklets" web page called Retirement Benefits outlines a method for a woman in her 60s to improve the situation. At full retirement age, she can draw the 1/2 benefit based on spouse's benefits but continue working to improve her own record and (perhaps) increase her own benefit to exceed that spousal amount. (At full retirement age—that's 66 for most boomer women—there is no limit on earned income so she would not reduce her benefit being received.) It is an interesting strategy. And it only requires that a woman work forever....

Very Basic Text: What Every Woman Should Know (ssa.gov/pubs/10127.pdf). Unfortunately, this online file doesn't tell us Everything That Every Woman Should Know, so it is only a starter text. It does help explain the basics about benefits for divorced women, so it has value there.

X- and Y-Generation Women May Be Less Bitter: For baby boom women, the bitter pill is created by the gender wage gap. But we know that for post-boomer women, the wage gap is narrowed. Admittedly, we may be leaving them with other bitter pills surrounding Social Security benefits.

Benefit computation is complicated: The Social Security office provides guidance to retirees but as we are encouraged to file online for benefits, we lose the likelihood of "talking through" our options and understanding the many sub-parts of the regulations. We can read an increasing number of government publications available on the web and try to sort through the particulars. That helps.

The expected disclaimer: Please do not rely on my interpretation of Social Security literature. I'm struggling to understand it all myself. And, as stated already, benefit computation is complicated.

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.


nancygonzalez said...

Hi, Mary... enjoy your blog. Regarding social security, it's also my understanding that to qualify for spousal benefits, one's marriage has had to last a minimum of 10 years. Do I have this correct?

One wonders if there are any women who stay in an unpleasant--or even violent relationship--to pass that 10 year mark. For a homemaker, that can represent a significant difference in benefits. For those of us who stopped out a few years for motherhood, it's thought-provoking.

Great topic.... Glad I've got 23 years under my belt!... Nancy Gonzalez, CFLE

Mary Bold said...

Right. 10 years is the qualifying length of a marriage. My understanding is that (using typical genders here), two women or more can receive benefits on the basis of having been married to the same man as long as they all meet the other requirements. Social Security does not inform all the players about ex-spouses' filings.

Anonymous said...

Hi Mary, just found your blog. I too find social security to be way too confusing. The examples they give seem to fit everyone except me, and i suspect many others out there feel the same way.

I wanted to comment on the blog about a woman waiting to collect until full retirement age, then taking 1/2 of husbands benefits and waiting until 70 to collect on her own. I did some calculations on that and it doesn't seem to make much sense.

For many women, their husband's benefit will be higher. Let's assume at FRA (full retirement age) a husband's benefit is $2,000 and a spouse's benefit is $1,000. I did the math, assuming 3% increase for every year for the husband from age 66 to 70. That works out to $2623. Now, a woman can collect on her husband's at 1/2 which would be $1311 at 70. She could at age 70 switch to her own, but calculating the 8% (for rate born after 1943) for each year until she reaches 70. Her benefit would be $1359.

Since the husband's benefit is higher to begin with, that is probably the way most women would go anyway. She could always check when she turns 70 to see what her benefit is - if it is higher than why not but I doubt it will be substantially higher. I think the only way this would work to her advantage is for the husband to wait until 70, which most of us unfortunately cannot do.