People write to me frequently with the idea of ââchanging the Social Security law in a way they think is smart and unique.
But I usually have to tell them that their proposal has been considered in the past.
After all, Social Security has been around for 80 years now, and for all of those eight decades people have been making plans that they believe would improve the system. And quite often, these plans don’t work under closer scrutiny. Here is an example of what I am talking about.
Question: I have been a homemaker and housewife for 40 years. Apart from a few years where I worked before getting married, I never contributed to Social Security. Therefore, I am not entitled to any benefit on my own file. I will only be entitled to benefits on my husband’s file. I don’t think it’s fair. I should get some sort of Social Security credit for all the work I have done as a wife, mother and housewife. I think a certain amount of money – maybe $ 1,000 a month – should be added to the Social Security record of all women who choose to stay home and have a career as a housewife.
A: In fact, it is an idea that has been brought up several times in the past. Not quite as you suggest. But something similar. This is generally referred to as âincome sharingâ. I’ll explain what it is in a minute. But first, let me explain why your specific idea wouldn’t work.
You suggested that $ 1,000 per month be added to the social security account for stay-at-home moms. Where would that money come from? And if it wasn’t real money, just some sort of credit added to your Social Security account, these pseudo-credits would eventually lead to Social Security retirement checks for all women in the world. foyer. And where would the money come from to pay for all these additional benefits?
And then you would also have to decide how to deal with women who work part time and stay at home part time. For example, my daughter-in-law works about 20 hours a week. The rest of the time she is at home as a mother and housewife. So instead of the $ 1,000 per month Social Security credit you suggest to full-time housewives, should she add $ 500 to her Social Security record?
And what about women who work full time but then come home and do a lot of housework? Shouldn’t they get some sort of Social Security credit for the housework they do? And besides, what about a man who works full time but comes home and supervises the kids, does the laundry, cooks a meal or does the dishes? Should he get social security credits for the housework he does?
Hope you see where I’m going with this. Your proposal, while well-intentioned, would be extremely difficult to implement and administer. Not to mention all the additional costs that would be added to an already overloaded Social Security system.
That’s why, when ideas like yours were thrown around in the past, many Social Security reformers came up with what they thought was a better solution. It was called âincome sharingâ.
In a nutshell, it would mean that the income of a married couple during their marriage would be shared for social security purposes. So, for example, if husband Fred was earning $ 100,000 a year and his wife Wilma was a stay-at-home mom with no outside income, $ 50,000 would go into Fred’s social security record and $ 50,000 would go into Fred’s record. Wilma’s social security.
And then let’s look at their neighbors, Barney and Betty. If Barney made $ 100,000 per year and Betty also worked outside the home and made $ 50,000 per year, for a combined total income of $ 150,000, $ 75,000 would be placed in each of their security accounts. social.
At first glance, this may seem like a good idea to some. But one of the main reasons this plan never went anywhere is the negative impact this plan would have on a married couple’s potential Social Security benefits.
To show you what I mean, back to Fred and Wilma. Fred was making $ 100,000 a year and Wilma had no income covered by Social Security. Under the current social security system, because he has quite a high income, Fred would likely end up with a fairly high monthly social security check. Let’s say it would be $ 3,000 per month. In addition, under the current system, his housewife Wilma would be entitled to spousal benefits according to Fred’s record – from 30 to 50%, depending on her age. To simplify my calculations, we will give it the rate of 50%. So that means Fred will receive $ 3,000 per month from Social Security and Wilma will receive $ 1,500 per month from Social Security for total benefits of $ 4,500 per month.
Now let’s say that the “income split” rules had been in place all the years that Fred and Wilma were married, meaning they each received half of Fred’s income added to their Social Security accounts. Well, that means Fred would end up with a Social Security benefit about half of what he was owed under the current system. In other words, Fred would start making $ 1,500 per month when he retired. But his wife Wilma, who had equal income on her Social Security record, would also get $ 1,500 a month. This is good news for Wilma. She gets her own social security check. But for both of them as a married couple, it’s bad news. Fred receives $ 1,500 per month and Wilma $ 1,500 per month, which gives them combined benefits of $ 3,000 per month. But that compares to the $ 4,500 in total benefits that would be owed to them under the current system.
Also, under a ârevenue sharingâ deal, things really don’t work out for Wilma after Fred’s death. Under the current system, Widow Wilma would get her spouse’s benefit of $ 1,500 per month plus Fred’s rate of $ 3,000. But with âincome sharing,â where they each end up with identical monthly benefits of $ 1,500 per month, there’s nothing more to touch – so Wilma wouldn’t get any widow’s benefit.
Those of you who think ârevenue sharingâ might be a good idea should remember this old adage: âBe careful what you want! “
If you have a Social Security question, Tom Margenau has a book with all the answers. This is called “Social Security – Simple and Smart”. You can find the book on www.creators.com/books. Or search for it on Amazon or other bookstores.