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Social Security and Today’s Mother

What mothers don’t know about Social Security can hurt them

By Kristin Maschka

On October 15, 2000, I walked away from a half million dollars in Social Security retirement income. That’s the day my daughter was born and the day I left the workforce to care for her.

Moms are busy people, and learning about the intricacies of the Social Security program usually doesn’t even make it onto their to-do lists.

“I’ve got a long time to plan for my retirement.”

“Oh, my husband handles all the long term financial planning.”

“I’m a mom. I don’t have time to learn about a complicated subject like Social Security.”

Sound familiar?

Few mothers take the time to look at how their caregiving responsibilities impact their Social Security eligibility and benefits. But if you understand the basics about how Social Security works, you can act to maximize your benefits, compensate for gaps in the program, and better analyze the various reform proposals.

Here’s the deal. When you work for pay, you earn Social Security credits. If you earn enough of them, you will be eligible for various parts of the program including retirement benefits. Once you are eligible for retirement benefits, the amounts are then calculated using earnings over your lifetime. If you don’t have enough credits or earn less than your spouse, you can also choose to take half of your spouse’s benefit at retirement.

Do you know where you stand? As complex as Social Security is, it’s easy to learn enough to make a big difference. And it’s worth the effort because what you don’t know now can hurt you later.

How much credit do you have?
The first basic in understanding your benefits is your admissions ticket - credits. You earn credits toward Social Security eligibility when you work and pay Social Security taxes on your earnings. In 2003, you receive one credit for every $890 you earn, up to a maximum of 4 credits per year. Anyone of working age today needs 40 credits to be eligible for retirement benefits based on her own earnings rather than her spouse’s. Typically, that means working full-time for 10 years.

Credits also play a role in other Social Security benefits. The program includes survivor’s benefits, Medicare, and disability benefits. Each of these has specific credit requirements. Knowing where you stand on Social Security’s other benefits is as simple as requesting a statement and can give you some peace of mind.

Recommendation: Check your Social Security statement. You should receive an annual statement around your birthday or you can request one at www.ssa.gov or by calling 1-800-772-1213. Do you have the 40 credits you need for retirement benefits on your own work record?

Recommendation: Depending on your specific situation, you may want to consider working enough to earn 40 credits toward retirement. In 2003, you need to earn $890 for one credit, $3560 for four. These can even be earned through a home-based business as long as you pay the appropriate Social Security taxes on your income.

Recommendation: Determine whether you or your spouse is currently eligible for survivor’s benefits if the other dies. Your Social Security Statement will tell you whether you have earned enough credits for your family to receive benefits upon your death.

Recommendation: Determine whether you are currently eligible for Medicare Hospital Insurance. Your Social Security Statement will tell you whether you have earned enough credits to be eligible on your own work record. Almost anyone 65 and over is eligible for the more basic Medicare Medical Insurance by paying a monthly premium.

Recommendation: Determine if you are currently eligible for disability benefits and what it would take to remain or become eligible. Your statement will tell you if you are currently eligible and how much your monthly benefit would be. No one offers disability insurance for unpaid workers so Social Security is one of the only ways for mothers out of the workforce to be covered for disability. For most of us, you need 20 credits earned in the 10 years immediately before you become disabled to be eligible for Social Security’s disability benefits.

How much money will you lose?
After credits, the next basic Social Security component to understand is how your retirement benefits are calculated and how leaving the workforce or cutting back on work impacts those benefits. Once you earn 40 credits, your monthly retirement benefit is calculated using your 35 highest earning years. These earnings numbers are tweaked and massaged by the Social Security administration accountants to factor for various things, but the bottom line is the higher your earnings, the higher your monthly retirement benefit.

Of course, the reverse is also true – the lower your lifetime earnings, the lower your monthly retirement benefit and mothers have the lowest lifetime earnings. While the wage gap between men and women has fallen, the wage gap between mothers and everyone else has widened. When they compared the earnings of people who have never had children, The National Longitudinal Survey of Youth found that women's earnings approach 98 percent of men's earnings. There is virtually no wage gap between childless men and childless women.

On the other hand, mothers earn 73% or less of the wages their male counterparts earn, whether or not they are fathers. And then there is the 2/3 of all mothers who are working part-time or who are out of the workforce who earn even less. The result is a wage gap between mothers and everyone else that is big and getting bigger.

Since 81% of women become mothers, most women pay a double penalty for spending time caring for their children. They lose income over their lifetime and then that decreased income is used to calculate their Social Security retirement benefits. In 2000, women’s average monthly retirement benefit was $697. Men’s was $904.

Mothers take a hit to their lifetime earnings in three ways -- the first is that they are more likely to take time out of the workforce to care for children or elderly relatives. According to Joan Williams, director of the Program on Gender, Work, and Family at American University Law School, among mothers ages 25 and 44, the key years for career advancement, 1 in 4 is out of the workforce. Over time, these years add up. Of workers retiring in 1998, women worked a median 29 years while men worked 38.

Although the gap is projected to narrow, women are expected to continue to work fewer years over their lifetimes. Men who work the median 38 years have no trouble posting earnings in the 35 years used by the Social Security Administration to calculate monthly retirement benefits. In fact, they can drop their 3 lowest earning years out. On the other hand, mothers who work the median 29 years will have 6 zero years averaged into their calculations. As Ann Crittenden, author of The Price of Motherhood, observes, “The biggest injustice for women in the Social Security system is that it simply doesn't consider their work as mothers as work. Raising a child, who will grow up to support the Social Security system in the future, does not count as a contribution to the system. You earn a zero for every year you spend raising your own child.”

Mothers take another hit because they are more likely to work part-time. Over 40% of mothers work part-time, meaning less than 40 hours a week. In 1998, 67.5% of all part-time workers were women. Not only do part-time workers earn less because they are working less, they also earn proportionately less. On average, part-time workers earn 40% less per hour for the same work as full-time workers.

Finally, even when they work full-time, mothers earn less than everyone else. Mothers are more likely to avoid jobs which require substantial overtime and more likely to take lower paying jobs with regular hours and flexibility. Again, Joan Williams points to the group of mothers ages 25 and 44. Her research tells us that of those that are employed, 2 out of 3 work less than a 40-hour week. Only 8 percent work more than 50 hours. Yet we’re all aware of the overtime hours often required to get ahead these days. “Mothers don’t work overtime,” Williams concludes, “But 1 out of 4 fathers works more than 50 hours a week.”

The decreased earnings for all these reasons create a benefit disparity which would seem to be disturbing enough all by itself. But it’s compounded by the happy reality that women live longer than men. What’s the down side of living an average of 3.5 years longer than men? Women depend on Social Security benefits longer and are more likely to run out of other retirement assets and depend solely on these benefits. It’s not hard to see why the poverty rate for elderly women is nearly twice that of elderly men.

In spite of the potential for huge financial impact, Social Security is rarely one of the host of factors families consider when making decisions about balancing work and family. For the sake of your family’s finances and your financial health in old age, it pays to understand how your work patterns will impact your benefits so you can consider both short-term and long-term impacts.

Recommendation: Maximize your 401k contributions or other retirement contributions while you are working to help compensate. Social Security alone will not be enough to provide for your retirement. It should serve as a supplement to other retirement savings.

Recommendation: The retirement age for those born in 1960 or later is 67. Check your Social Security statement. How many potential earning years do you have between the time you started working and age 67? How many years do you have where you could afford to leave the workforce or cut back on your paid work and still have 35 years of high earnings?

Recommendation: When you plan for retirement, be sure to include realistic estimates of your Social Security benefits based on reasonable assumptions about your work patterns.

What’s a spouse worth?
Another basic building block of Social Security is the spousal benefit. At retirement age, you can choose to claim 100% of the benefits based on your own work record or 50% of the benefits your spouse has earned. For married women who have not worked for pay at all or very little, 50% of their spouse’s benefits serves to compensate them for years of unpaid caregiving work.

For mothers who do work enough to claim benefits on their own record, they often find that they are still better off taking 50% of their husband’s benefit because they have earned significantly less than their spouse. In fact, although men are also eligible to take the spousal benefit, today 63% of women claim the spousal benefit while only 1.2 % of men do. Many mothers who work get no added benefit from the Social Security taxes they pay, because they end up claiming the spousal benefit anyway.

To make matters worse, you must be married for 10 years in order to qualify for benefits on your spouse’s work record. Divorce the day after your 10th anniversary, and you get 50%. Divorce the day before and you get zero. Since the average length of a marriage today is 7 years, this 10 year requirement leaves many mothers high and dry. A woman who divorces after 9 years of cutting back or staying at home to care for the children of a high-earning spouse, can find herself with no eligibility for Social Security benefits to reward that unpaid work.

Even if you do divorce after 10 years, you face the prospect of getting decreased benefits. If you remain married, he claims 100% and you claim 50% of his benefits - in effect providing you each with 75% of his benefits. After a divorce, you get the 50% benefit and he gets the 100%. To add insult to injury, in a divorce, most state laws do not allow the courts to award additional assets to a spouse in order to compensate for this loss of Social Security income.

Recommendation: Consider the spousal benefit calculation when making decisions about working for pay and planning for retirement. Review both spouse’s Social Security statements together.

Recommendation: Even if you are working only part-time or are out of the workforce, consider contributing to a retirement plan in your own name.

Recommendation: No one plans to divorce, but just be aware that 10 years is an important milestone.

How will this impact your decisions?
When I took the time to look at the impact on my benefits, I used the Social Security Administration’s own calculators on their website to look at two scenarios. In one, I assumed that I continued to work full-time in my same line of work until retirement without interruption. In the other, I assumed that I left the workforce for seven years to care for my daughter and then reentered full-time. Leaving the workforce for seven years cost me $2000 a month in retirement benefits. Assuming I live to be 87 that’s nearly a half million dollars.

Looking back, the half million I unknowingly walked away from the day my daughter was born wouldn’t have changed our decision about her care. There are so many personal and practical things that go into that decision for each family. But I do wish we had known to consider these factors. I have now figured out that I can stay out of the workforce or cut back for up to 5 years and still have 35 years of high earnings on record and that will influence our next decision about my work. My new found “expertise” in Social Security has also motivated me to pay close attention to potential Social Security reforms to make sure they remedy the price mothers pay for caring for their children. I’ve decided I can’t afford not to understand how Social Security impacts my family and me. Can you?

Find Out More
Mothers can’t afford to ignore the workings of Social Security. The majority of us will spend 1/3 of our lives on our own financially. In their guide, “Social Security and Today’s Woman,” the Social Security administration tells us, “Whether a woman works, has worked, or has never worked, it is important that she knows exactly what Social Security coverage means to her.” There are several ways to learn more about Social Security.

The Social Security Administration’s central website:

The Social Security Administration’s own website for women:

Or call Social Security’s toll-free number for questions
or to find a local office: 1-800-772-1213

Social Security Reform
As Ann Crittenden, author of The Price of Motherhood, warns, “Many are skeptical now that Social Security will exist when they retire. On this they are wrong -- it is, and will remain the single greatest source of income for older American women.” It is more likely, however, that there will be major Social Security reform during your lifetime. Keep your eye on these and other proposals:

  • Family Service Credit. Provides credits and posts earnings to the Social Security system for the low earning parent in years that children are under six or for someone caring for elderly relatives.
  • Drop Out Years. Provides a number of “drop-out” years to primary caregivers for each child. Instead of averaging earnings over 35 years to determine retirement benefits, earnings would be averaged over 35 years minus the number of drop out years.
  • Income Splitting. Requires married couples to “split” their combined income for the purposes of Social Security credits. Regardless of who earns what, each spouse gets Social Security credit for half the combined income.

This article was originally published in the September/October 2003 edition of the Mothers & More Forum.

Kristin Maschka originally wrote this article for an online writing course when her daughter was 3 months old. The writing course was her intellectual outlet before she became a volunteer with Mothers & More! Two and half years later, Kristin now serves as the President of Mothers & More and is happy to see this article finally published. She lives in Pasadena, CA with husband David and nearly 3 year old Kate.
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