Women and Social Security Benefits in a Two-Income Household

The structure of the Social Security benefit designed for women has not kept up with their changing socio-economic status.

In an unexpected twist, because of how Social Security was designed and when, the people who are most at risk for coming up short on benefits, are women in a two-income household, says Benefits Pro in a recent article “How Social Security rules harm the two-earner household.”

It doesn’t seem right, but this counter-intuitive fact is the conclusion of a brief from the Center for Retirement Research, the highly respected center at Boston College. They examined how women’s changing marital history affects retirement income. The conclusion is a surprising one.

As women’s marital and work status have changed over the years, with women spending more time as single than in the past, they will spent about half their adult lives married. Therefore, the sources of funds they would have otherwise counted on have shrunk.

To keep it in perspective, most households in general are not prepared for retirement. The National Retirement Risk Index shows that 50 percent of all American households are at risk of falling short in retirement, the report said, even if they work to age 65 and annuitized all of their financial assets.

Social Security has not kept up with the changes of more women opting to be single and working outside of the home. Women continue to face a higher risk of running out of money during retirement, in part due to lower earnings, less time in the workplace and often working part-time while raising children, rather than full-time. However, women in a two-income household face more of a risk. Here’s why.

Social Security provides a benefit equal to 50 percent of the worker’s benefit. If a second spouse is working, the spousal benefit drops gradually, and disappears completely when the second spouse’s worker’s benefit matches or exceeds the level of the spousal benefit. This means that the average two-income couple has a Social Security replacement rate that is not only lower than the one-income household, but also significantly below the rate for single women.

Another problem for two income households: often only one of the two workers is eligible for an employee-benefit retirement plan. Instead of saving for two, that spouse is likely to save for a single participant. That’s half of what the couple will need.

Another handicap for women’s retirement is the financial scars left by divorce. Nearly a third of all women in a couple have been married before, and this boosts retirement risks by as much as 10 percent.

So not only do two-income households need to save more for retirement, Social Security needs to maintain its currently scheduled benefits for single women.

Reference: Benefits Pro (July 22, 2019) “How Social Security rules harm the two-earner household”

Suggested Key Terms: Social Security, Retirement, Single Women, Spousal Benefits, Two Income Households

About the author

Bob Brumfield

Attorney Bob Brumfield has been practicing law since 1984 and regularly receives the “Top Lawyers in California” award as well as the “Client Distinction” and “Client Champion” awards from Martindale-Hubbell.

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