V I E W P O I N T

WOMEN'S SOCIAL SECURITY BENEFITS

BACKGROUND

While Social Security is a program that is vitally important to all Americans, it is especially important to the financial security of women.  There are a number of reasons why this is so.  First of all, women live longer than men.  On average, women today who reach age 65 outlive men by four years.  These additional years of longevity increase the risk that women may outlive their savings or that their pensions may lose their purchasing power. 

Additionally, women are less likely than men to have an employer pension.  On average, only 28 percent of women receive a pension compared to 43 percent of men.  And when women do have pensions, they tend to be smaller on average than those received by men.  Stated simply, women depend substantially in retirement on the benefits they receive from Social Security.  These benefits last a lifetime and unlike many pensions, are adjusted for increases in inflation.  In 2008, 46 percent of elderly unmarried women receiving Social Security relied on it for 90 percent or more of their total income.

What follows is a description of the kinds of benefits women can receive from Social Security, followed by a discussion of some recent proposals to change Social Security, and the risks to women that we believe are associated with these changes.

SOCIAL SECURITY BENEFITS FOR WOMEN

A woman who works a sufficient length of time in Social Security-covered employment becomes eligible for her own Social Security benefit.  If she is married, she also may be eligible for a spouse benefit or widow benefit based on her husband's earnings record.

A married woman who is not eligible for Social Security based on her own work record can receive a spouse or widow benefit.  A married woman who is eligible for her own Social Security benefit can receive part of her spouse or widow benefit if it is higher than her own benefit.  In other words, she can receive her benefit plus the difference between her benefit and the spouse or widow benefit.  Similarly, a woman who works in non-Social Security-covered public employment can receive a Social Security spouse or widow benefit only if it exceeds two-thirds of her public annuity.

If divorce occurs before 10 years of marriage, a woman is eligible only for her own Social Security benefit.  If divorce occurs after 10 or more years of marriage, an unmarried divorced woman is eligible for the same spouse or surviving spouse benefit she would have received had there been no divorce.

If a woman remarries after age 60 (50 if disabled), she may still receive a surviving spouse benefit.  Early retirement severely reduces benefits.  A young disabled widow or an older widow with no work experience may have no choice but to apply for a reduced benefit at the earliest age of eligibility. Social Security offers little incentive for widows to delay benefits, especially if the deceased spouse retired early, as benefits are capped based on the husband's early retirement.

Severely disabled widows not yet retirement age are eligible for early widow benefits, although benefits are reduced as if retirement were a voluntary choice.  Disabled widow benefits are not payable before age 50 and disability must occur within seven years of widowhood or seven years of eligibility for mother benefits (caring for a dependent child under age 16 or disabled).

There is no gender discrimination in how Social Security benefits are determined.  Nevertheless, an average female worker generally receives a substantially smaller Social Security check than a male worker.  In 2008, the average monthly Social Security benefit of a retired man was $1,300, while the average monthly benefit of a retired woman was $1,000.  This is explained, in part, because women generally have lower earnings than men.  For example, in 2008, the median earnings of full-time working age women were $35,000 annually, compared to $45,000 annually for men.  Additionally, women are more likely to spend years outside the workforce devoted to unpaid caregiving.

In 2009, over 20 million women aged 65 and older received Social Security benefits. A woman who reaches age 65 can expect to live an additional 20 years.  For these women, Social Security represents a critical source of income, and is often their only available hedge against inflation.  Without Social Security, over half of these women would be living in poverty. Even with Social Security, 12 percent of older women still live in poverty; for widows, the rate is worse, at 15 percent. This is 50 percent higher than the poverty rate for all people 65 and older.

Currently when a woman is widowed and begins to collect widow benefits, household Social Security benefits decrease by 33 to 50 percent.  The decrease in benefits at widowhood is larger for households in which both spouses had nearly equal earnings.  As more women entered the workforce in the second half of the twentieth century, their contribution to total household income increased. However, Social Security rules have not been updated to reflect this societal change.  Consequently this increased share of household income contributed by wives will not result in higher widows' benefits.  On the contrary, more widows will experience a reduction approaching 50 percent of household income.

NATIONAL COMMITTEE POSITION

Women deserve an adequate retirement income whether a work life is spent in the home, in the paid workforce, or a combination of the two.  The National Committee supports changes that safeguard benefits for women, especially those with the greatest need, and improve benefit equity between one-earner and two-earner couples. We oppose changes that would reduce benefits for women and weaken their financial situation.

A variety of proposals to change Social Security have been circulated recently, many of which would affect women. The National Committee is committed to a secure, equitable retirement for all Americans and is concerned that the following proposals would renege on the Social Security promise to America’s seniors. 

• Privatization - Representative Paul Ryan has proposed a plan that would offer a privatized Social Security option for workers under 55.   This would divert payroll taxes out of Social Security into private accounts of investment funds and put additional strains on the system. There is no doubt this would result in benefit reductions.  Americans said no to a similar proposal by President George W. Bush in 2005 and will say no once again to this proposal.  Women and minorities, who are frequently on the lower end of the wage scale, fare better under today's more progressive Social Security system, which replaces a higher percentage of salary for  low-income wage earners.  Additionally, Social Security’s all important cost-of-living adjustments (COLAs) ensure that benefits are protected against inflation, a protection that would not be available with private accounts.

• Increase the retirement age – President Obama's National Commission on Fiscal Responsibility and Reform, and other Commissions have proposed increasing the retirement age.  These Commissions argue that people are living longer, and can therefore work longer.  Although on average, people are living longer, these longer life expectancies are by no means across-the-board.  Over the last quarter-century, the life expectancy of lower-income men increased by one year compared to five years for upper-income men. Lower-income women have actually experienced a decline in longevity during this period.  The proposed increases in the retirement age would apply to all workers, whether or not they are living longer. An increase in the retirement age represents a benefit cut. If this proposal is enacted, future retirees will face benefit reductions that grow larger with each generation, resulting in as much as a 15 percent cut in benefits.

• Change the benefit formula – Several proposals have been offered to change the benefit computation formula in an effort to make it less generous to high-wage earners.  However, the proposed changes affect all workers and reduce benefits for workers earning as little as $11,000 per year.  With women and minorities so frequently occupying low-wage jobs, any change from the current formula, which replaces a higher percentage of salary for lower wage workers, will adversely affect them.

The following proposals would improve benefit equity and safeguard benefits for women. The National Committee supports these proposals.

• Survivor Benefits: In a one-earner family, when one spouse dies, the survivor receives two-thirds of the couple’s combined benefits.  However, if each spouse has earned a worker benefit, the survivor receives only the larger of the two benefits.  This can be as little as half of the couple’s combined checks.  Providing a widow or widower with two-thirds of the couple's combined checks treats one-earner and two-earner couples more fairly and reduces the likelihood of leaving the survivor in poverty.

• Special Minimum Benefits: Social Security determines monthly benefits under a Special Minimum method if that method will result in a higher benefit than under the regular method.  Monthly Special Minimum benefits are a multiple of a dollar amount times the number of earning years over ten and up to thirty.  In 2010, the Special Minimum method provided a worker with 30 years of substantial earnings at least $763 per month.  If up to ten years spent caring for children or dependent adults could be counted towards the Special Minimum benefit, many women with work careers divided between home and the paid workforce would be eligible for higher worker benefits.  Counting five additional years of earnings toward the Special Minimum would make this benefit method available to more workers and assure at least a poverty level income to anyone with 35 or more years of earnings.

• Disabled Widows: A disabled widow is the only disabled person whose benefit is reduced for early retirement.  The early retirement reduction should be removed as should the age 50 and seven-year limitations.  These provisions were placed in law in 1967 to safeguard against excessive payments because no reliable estimate could be made regarding how many widows might qualify.  It is now known that these limitations affect relatively few widows and could be removed without excessive cost.

• Working Widows: Under current law, a widow benefit is capped at the amount the deceased spouse would receive if he were still alive.  If a husband retires before normal retirement age, his widow inherits his early retirement reduction.  However, the widow can receive no less than 82.5 percent of the wage earner's full benefit if she is at least 62 before beginning her widow benefit. Apart from that limited protection, a widow can neither cancel her husband's early retirement reduction nor enhance her widow benefit by delaying her own retirement.  More widows might choose to enter or remain in the work force if doing so would increase the widow benefit they ultimately would be eligible to receive.
  
  

CONCLUSION

We all agree that changes are necessary to close Social Security’s modest funding gap.  However, closing the funding gap should not come at the expense of women who are counting on Social Security benefits to provide an adequate retirement income. Any proposals to address Social Security’s shortfall must take into account the impact on women, especially those in lower- income categories. 

Government Relations and Policy Department, October 2011