Women Who Stay at Home Might Lose Out On Some Social Security Benefits
Last week I wrote about a few of the little known ways to increase Social Security benefits. This week I thought I might add to the discussion by revealing lesser known facts that keep women (and some men) from claiming higher benefits.
One of the least recognized facts about Social Security is that the number of years in the Social Security system may dramatically affect benefits running for the rest of a worker’s life. I came to this realization myself based on some reading and experience.
The reading that got me thinking was an article in a legal periodical years ago titled “Why Are So Many Older Women Poor?” Although Social Security was not the only topic for discussion, it was one.
Then, as I watched women who came to my office, I noticed how low the monthly Social Security benefit was. In situations where both spouses had worked, while a husband’s benefit might be $2,000 a month or more, his wife’s benefit could be $400 or $500 a month. This was, of course, prime time to tell the couple that they could improve this situation by requesting Social Security to base the wife’s monthly check on one-half of her husband’s benefit. (To understand this strategy, read last week’s column.)
I understood that women historically have had lower earnings than men and this was especially true for women I meet of retirement age. Still, the gap remained unexplained until I located a pamphlet detailing how the calculation is run. The answer for the difference was very simple.
Social Security is calculated considering the worker’s highest 35 earning years. It adjusts for inflation, determines the average adjusted monthly earnings, and multiplies by a formula.
Suppose an employee has not worked 35 years in her or his lifetime before retirement? For those who have not worked 35years by retirement age, the missing years are considered using zeros. While a worker might think that working fewer than 35 years would mean that an average would be taken only of the years worked, actually those years outside the system are counted but they are counted as zeros to arrive at the best of 35 years..
It does not take a mathematician to figure that working fewer than 35 years can seriously undermine benefit calculations. This is one way that women, especially older women, tend to have lower Social Security retirement benefits on their own work record.
When a mother (or father) stays home to raise the children, unless they also work a job from home and pay into Social Security, she (or he) is out of the Social Security system. Later, if it is necessary to remain at home to care for aging parents or in-laws, then the worker is again outside the system unless she or he works from home and pays into the system.
It would not be difficult to spend fewer than 35 years in the Social Security system. If you graduated from college at age 22 and spent ten years raising your family and then returned to work and retired at 62, you would have lost 5 years from the system not to mention retiring at a lower early retirement benefit. If you also graduated at age 22, not having worked prior and then spent ten years raising your children while later spending from age 56 to 66 caring for aging parents without contributing as an employee into the Social Security system, you would have lost 11 years. Those years would be averaged into the total for 35 years as zero.
Recognizing this as a potential problem, one obvious way to deal with it if you are not yet at retirement age is to work at a job that pays into Social Security on your behalf even where the job is not the highest paying one. Although lower income for Social Security purposes can reduce overall benefits on retirement, it does not affect it as much as no income would. Obviously high income is best.
Another possibility is to review what one-half of your spouse’s benefit would be and determine whether this would be higher than benefits on your own work record.
For widows or widowers whose deceased spouse’s Social Security benefit was higher, the widow or widower can “step up” to her or his deceased spouse’s benefit.
Many Social Security resources are available on-line at www.socialsecurity.gov. Seek help where help is needed to explain.
For more, listen to “50+ Planning Ahead” a weekly radio program on WCHE 1520 on every Wednesday from 4:30 pm to 5:00 pm with Janet Colliton, Colliton Law Assocs., PC, and Phil McFadden of Home Instead Senior Care.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.