Q. I read an article about divorced wives being able to collect on their ex-husbands’ Social Security and the ex-husband doesn't even have to know. I have a hard time figuring out how anyone can get half of her husband’s or ex-husband’s Social Security when the calculations don't add up. Where does this money come from? For example, if a man qualified for $1,000 benefit and his wife gets $500 that would mean that he is getting $1,500. If the ex-wife is also entitled, then he is now getting $2,000.
They don’t cut his in half to give her half. So where is the additional money coming from? I believe the additional money is coming from future recipients. Is this why Social Security won’t have enough funds to allow my son (who works) to collect when he retires? How does our government allow this to happen?
Also, what about all the people collecting Social Security disability never getting rechecked to see if they still qualify? I am 70 years old. I still work so I can keep up with the $10,000 property tax. I will never be able to retire; yet women who have never worked, or worked off the books, are collecting Social Security. That’s money from my paycheck. Why is our government so dumb? —M.S., Clifton, NJ
A. How you see things is correct— or would be— if Social Security were an actual pension plan. If that were the case, all benefit payments would be proportional to the employment taxes paid in. But Social Security is NOT a pension plan. It is a social program designed to provide at least some amount of income for everyone. This includes the disabled, former spouses who were married for at least 10 years and under-age children of deceased Social Security recipients. It doesn't compute as transactions for individuals. But many argue that it does compute for the greater good.
Let me give you an example. Suppose a woman marries, has children and elects (at her husband’s request) to be a full-time mom. Suppose that thirty years later, her husband dumps her for a younger woman. This leaves the full-time mom out in the cold, with no work history and no retirement income. She could be destitute. I have met women in their late 50s in this position. For them, having rights to draw benefits based on the work record of a former spouse may be all they have. In this instance, Social Security functions as an instrument of compassion and care.
Similar circumstances apply for people who are born with severe disabilities or with a mental illness that renders them unemployable. The disabled can either draw benefits based on their work record, or when that record isn’t sufficient to qualify for benefits they qualify for a program known as SSI— Supplementary Security Income. While some of the disabled are those wishing to avoid work because of, say, a "bad back," the reality is that there are hundreds of thousands of people who are blind, mentally impaired, mentally ill, or otherwise incapable of supporting themselves.
Are they taking money from your son, or you or me? No. A portion of the employment tax is earmarked for people who are disabled. "There but for the grace of God" is where we would obtain our income if we were disabled.
In fact, these issues are a sideshow. Their costs are minor compared to the cost of living longer. Greater longevity means we will receive Social Security benefits longer. In 1935, life expectancy at birth was 61.7 years— less than the age for collecting Social Security benefits. By 2010, life expectancy at birth had risen to 78.7 years. What we, and the politicians we elect, want to do is live the added years of life and duck the bill. That won’t happen.
We have a big choice to make in the next few years. We can point fingers at cases of imagined injustice or unfairness and get nowhere. Or we can take a happier road. We can appreciate the gift of life. We can man-up (and woman-up) enough to pay for the extra years of life.
The alternative is to duplicate the living and health conditions of the many nations where life is short and few live long enough to retire.
Scott Burns is the retired Chief Investment Officer of AssetBuilder, the creator of Couch Potato investing, and a personal finance columnist with decades of experience.