Social Security rules are complicated and change often. For the most recent “Ask Larry” columns, check out maximizemysocialsecurity.com/ask-larry.
Boston University economist Larry Kotlikoff has spent every week, for more than two years, answering questions about what is likely your largest financial asset — your Social Security benefits. His Social Security original 34 “secrets”, his additional secrets, his Social Security “mistakes” and his Social Security gotchas have prompted so many of you to write in that we feature “Ask Larry” every Monday. Find a complete list of his columns here. And keep sending us your Social Security questions.
Kotlikoff’s state-of-the-art retirement software is available here, for free, in its “basic” version. His new book, “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits,” (co-authored with Paul Solman and Making Sen$e Medicare columnist Phil Moeller) was published in February by Simon & Schuster.
Watch Larry explain how Paul and his wife could collect an extra $50,000 in Social Security benefits:
One thing is clear about Social Security’s rules. They were mostly written in the 1950s, ’60s and ’70s when women were supposed to “know their place,” — namely stay at home, clean the house, make supper, bring up the kids, remain monogamous, and, in the case of divorce, don’t remarry. The rules are also very generous to new wives, especially younger new wives.
GOT SOCIAL SECURITY QUESTIONS?
Times have changed, but Social Security has not. Women are still earning less than men, on average, and the system’s rules are, as a result, effectively sexist despite their nominal sex neutrality.
My definition of sexism here is that the rules are more likely to harm women than men.
Here is my list of 20 Social Security rules, provisions and outcomes that are, I believe, sexist:
- You need to be married at least 10 years to collect divorcee spousal or divorcee widow benefits.
- If you get divorced, you can’t collect child-in-care spousal benefits based on your care of young or disabled children unless you are older than 62.
- If you remarry, you lose your right to divorcee spousal benefits.
- If you remarry before age 60, you lose your right to divorcee widow benefits.
- Take two wives, A and B. They both have high-earning husbands who earn the same amount. Wife A doesn’t work a day in her life and pays not a penny in Social Security taxes. Wife B works every day of her life and pays 12.4 percent of every dollar she earns to Social Security. Wife A and wife B can collect exactly the same benefits, i.e., wife B may get absolutely nothing back for paying all those FICA taxes month after month.
- In the above, if wife A’s husband earns more than wife B’s, wife A can end up with more benefits than wife B even though she hasn’t paid a penny into the system.
- If the ex-husband takes his retirement benefit early, the wife gets a smaller widow benefit when he dies.
- A wife can’t collect her spousal benefit until her husband files for his retirement benefit, which can be as late as his reaching age 70.
- An ex-wife can’t collect her divorcee spousal benefit until her ex is 62 and she’s been divorced two or more years (unless her ex has filed for his retirement benefit).
- Delayed retirement credits are not provided for spousal, divorcee spousal, widow, or divorcee widow benefits if the beneficiary is waiting to claim them until after full retirement age.
- Thanks to the family benefit maximum, an ex-husband that has children with his new wife will reduce the child benefits available to children from prior wives.
- Because they accumulate less wealth by retirement, women are less likely than men to be able to afford to wait to collect far higher retirement benefits.
- Wives that are four or more years younger than their husbands never have to wait beyond full retirement age to collect full spousal benefits.
- Husbands can get their new wives spousal benefits after being married for only one year.
- Husbands can get their new wives’ widow benefits by being married for just nine months.
- Husbands that divorce their wives can collect spousal benefits on their wives’ work record when that’s not generally the case.
- Women are disproportionately employed as teachers and other state workers in non-covered employment. Their SS benefits are substantially docked (via the Windfall Elimination and Government Pension Offset provisions) due to receipt of pensions from non-covered employment.
- Those who earn above the taxable ceiling after age 60 — mostly men — get automatic benefit increases each year they work.
- If you work and lose your child-in-care spousal benefit, or your mother’s benefit due to the earnings test, there is no compensation in the form of higher benefits after full retirement age.
- If you are a high-earning woman and take time off to have children, the years of zero earnings won’t be filled in with earnings above the taxable ceiling arising in the years you earn above the ceiling.
The Counter Argument
Every coin has two sides, and one can view many of these features as assisting women relative to men. After all, given their relatively lower earnings levels, women are the major beneficiaries of child-in-care spousal benefits, spousal benefits, divorcee spousal benefit, widow benefits, and divorcee widow’s benefits.
My list provoked some discussion about the ways these rules have been challenged over the years, and whether there have been instances of policies that were discriminatory toward men.
Jerry Lutz, the long-time former Social Security technical expert who reviews all of my columns for accuracy, had this to say:
I started with SSA in 1976. At that time, in order for husbands and widowers to receive benefits on their wives’ accounts, they had to prove that they were receiving more than one-half of their support from their wife. In practice, that meant that there was virtually no such things as husband’s or widower’s benefits.
On the other hand, wives and widows never had to prove dependency on their husbands in order to receive benefits. This was challenged in a court case, and ruled discriminatory in 1977.
SSA was forced to acquiesce to this ruling and allow husbands & widowers to also receive benefits without proving dependency. But in response, Congress passed the government pension offset provision in order to preclude career civil service employees from receiving Social Security benefits on the accounts of their spouses.
Jerry’s response reminded Paul Solman — NewsHour economics correspondent and a co-author of our book, “Get What’s Yours” — of something he had read in The New Yorker, a 2013 profile by Jeffrey Toobin of Supreme Court Justice Ruth Bader Ginsberg, which discussed her involvement in another case on that exact issue:
Ginsburg launched a series of cases targeting government rules that treated men and women differently….Often, Ginsburg’s clients were men, and she tried to choose test cases in which the facts were startling, even tragic. Stephen Wiesenfeld was a widower whose wife, a schoolteacher, had died in childbirth. He wanted to devote himself to raising their infant son, so he applied for survivor benefits from his wife’s Social Security. Widows automatically received the benefits, but a widower had to prove that he was dependent on his wife’s earnings, which Wiesenfeld could not do. Ginsburg took Wiesenfeld’s case to the Supreme Court and in 1975 won another unanimous victory.
So I’ll leave it to you, my readers, to form your own take on the degree to which these provisions are or are not sexist. But I also encourage you to ask whether we should condemn our children, grandchildren and their offspring to a system with these provisions.
Editor’s Note 4/30/2015: We’ve added an inquiry from a reader who had a question about spousal benefits.
Jane: I am only 31 years old, I purchased and read “Get What’s Yours” so I can make sure I get the most out of the FICA deduction from my paycheck when the time comes. I was fascinated with the complexity of the Social Security system and all of the money that is left on the table by most people in our country. My knowledge gained from the book has made me popular among my in-laws and 60+ year-old friends.
In reading the book, I discovered that my mother and father-in-law can probably get a few extra bucks by utilizing the spousal benefit, but I want to make sure I advise them properly and not end up costing them money. Here is the scenario…
My father-in-law is 67 and has not filed for his benefits, and wants to wait until age 70. In all likelihood, he will probably be entitled to the maximum amount available (or close to it) based on his 35 highest earning years.
My mother-in-law turned 62 in September 2014 and has not filed for benefits either. She is due around $600 per month if she files for her benefit right now (which she wants to do).
After reading your book, here is what I think they can do: My mother-in-law should file for her benefits right now, getting approximately $600 per month. Meanwhile, my father-in-law should file and suspend his benefits until age 70, but start taking the spousal benefit which would be half of my mother-in-law’s benefit that she would receive at FRA (her FRA benefit is approximately $800 per month). Once my mother-in-law reaches FRA she should switch from her personal benefit to the spousal benefit, so she gets the full 50% of my father-in-law’s benefit (which she can get if he files and suspends). Finally, once my father in law turns age 70, he can take his own benefit in place of the spousal benefit.
I am reaching out to you directly only after I looked everywhere in the book for an example that mirrored this scenario exactly, but I could not find it. I’ve searched the internet near and far, high and wide, but still can’t seem to find confirmation that this scenario would play out the way I envision without screwing up my father in laws large benefit at age 70 and my mother in laws large spousal benefit once she reaches FRA.
If you could advise whether or not my train of thought in this situation is correct or if I am missing something, I would greatly appreciate it and be forever indebted to you.
Thanks in advance for any help you can provide, and thanks to you for writing the book.
Larry Kotlikoff: My co-authors, Paul Solman and Phil Moeller, and I are delighted that you and others in your age group are helping your parents and grandparents navigate Social Security’s maze of rules. I’m even more delighted that you wrote to ask what your in-laws should do.
Unfortunately, your proposed strategy runs afoul of Social Security worst gotchas. If your mom-in-law (I’ll call her “Sue”) files for an early retirement benefit and your dad-in-law (I’ll call him “Dan”) files and suspend, Sue will be deemed to be filing for her spousal benefit. She will then get approximately the larger of her own reduced retirement benefit and her reduced spousal benefit. So one benefit will wipe out the other. If she has a decent history of earnings, her own reduced retirement benefit will be larger and she will never ever collect a spousal benefit — not before full retirement, not at full retirement, not after full retirement — never.
As for Dan, let’s assume he files for and suspends his retirement benefit and then files for his spousal benefit on Sue’s work record. Because he files for his retirement benefit (whether or not he immediately suspends it), he loses the ability to collect a spousal benefit by itself on Sue’s work record. Instead, he will receive what’s called his excess spousal benefit — the difference between half of Sue’s full retirement benefit and 100 percent of his own full retirement benefit augmented by his accumulated Delayed Retirement Credits. Dan’s excess spousal benefit is very likely to be negative, in which case it will be set to zero.
To summarize, your proposed strategy will likely mean that neither Sue nor Dan receive an excess spousal benefit let alone a full spousal benefit. A better strategy is for Sue to wait until full retirement age and then file just for her spousal benefit. This will be a full, not an excess spousal benefit because she won’t have filed for her own retirement benefit. She’d collect this full spousal benefit — equal to half of Dan’s full retirement benefit — through age 70 when she would file for her own retirement benefit. Dan, for his part, would simply wait until 70 to collect his retirement benefit.
Another option would be for Sue to file now, and for Dan to file for spousal benefits only on her account. Then, Dan would file on his own account at age 70, and Sue would file for excess spousal benefits at age 66.