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Social Security Reform Thursday: Week Thirty-Nine -- Broken Benefit Calculation Formula.


Thursdays are good days for reform, because they fall between Wednesdays and Fridays. And reform is a long-haul process, not a fleeting event. So we're going to keep plugging along with the case for reform, even as the issue goes off the political radar screen.

That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform.

This week's topic:

Dual-Income Families & Retirement Benefits.

The Social Security benefit formula is outdated. Even as more American couples both work, the system is often biased toward single income earners.

For example, note these two families, one with a single income, the other with two incomes, making the same income (.pdf):


The American Institute for Full Employment (.pdf).

If that money had been in a private investment account, there would be no weirdness such as this. Money is money, earnings are earnings, and as long as two families put the same investment amount into same personal account plan, there is no such thing as "well, did this couple earn the money separately, or did only of them one earn it?"

If you'd like, you can play with the official Social Security benefit calculators at SSA.gov. See for yourself just how confusing and unfair the benefit formula can be.

A reformed Social Security system would allow Americans to maximize their retirement dollars, not according to the arbitrary and complicated calculations of any government bureaucrat, but through the power of the free enterprise system.

It's time for reform.

The clock is ticking.


Previous Reform Thursday graphics can be seen here:

-Week One (Costs Exceed Revenues).
-Week Two (Social Security Can't Pay Promised Benefits).
-Week Three (Americans Getting Older).
-Week Three, bonus (The Templeton Curve).
-Week Four (Fewer Workers, More Retirees).
-Week Five (History of Payroll Tax Base Increases).
-Week Six (Seniors Living Longer).
-Week Six, bonus (Less Workers, More Beneficiaries).
-Week Seven (History of Payroll Tax Increases).
-Week Seven, bonus (Personal Accounts Do Achieve Solvency).
-Week Eight (Forty Year Trend Of Increasing Mandatory Spending).
-Week Nine (Diminishing Benefits Sans Reform).
-Week Ten (Elderly Dependence On Social Security).
-Week Eleven (Entitlement Spending Eating The Budget).
-Week Twelve (Benefit Comparison, Bush's Plan versus No Plan).
-Week Thirteen (Younger Americans and Lifecycle Funds).
-Week Fourteen (The Thrift Savings Plan).
-Week Fifteen (Understanding Progressive Indexing).
-Week Sixteen (The Graying of America).
-Week Seventeen (Debunking Myths).
-Week Eighteen (Debunking Myths).
-Week Nineteen (Reform Needed Sooner Rather Than Later).
-Week Twenty (Global Success With Personal Accounts).
-Week Twenty-One (GROW Accounts: Stopping The Raid).
-Week Twenty-Two (Millions of Lockboxes).
-Week Twenty-Three (Support for Ryan-DeMint).
-Week Twenty-Four (KidSave Accounts).
-Week Twenty-Five (Latinos and Social Security).
-Week Twenty-Six (AmeriSave).
-Week Twenty-Seven (Cost Of Doing Nothing).
-Week Twenty-Eight (Chile).
-Week Twenty-Nine (Entitlement Spending Out Of Control).
-Week Thirty (Reform Better Deal Than Status Quo).
-Week Thirty-One (Social Security As A Labor Cost).
-Week Thirty-Two (Social Security And Dependence On Government).
-Week Thirty-Three (Social Security, Currently A Bad Deal For African-Americans).
-Week Thirty-Four (Longer Life Expectancies Straining Social Security).
-Week Thirty-Five (Howard Dean & Salami).
-Week Thirty-Six (Growing Numbers of Beneficiaries Draining Social Security).
-Week Thirty-Seven (The Crisis Is Now).
-Week Thirty-Eight (Disability Benefits).

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

Posted by Will Franklin · 3 November 2005 09:27 AM


One should always keep in mind what the primary (or at least a very major secondary) purpose of Social Security was back in the late 1930s: To bribe people to stay out of the labor force and thereby "reduce" unemployment. It became fundamentally irrational for wives (and yes it was exclusively wives back then) to go to work.

One curious political ramification of this was that radical liberal feminists were one of the few ardent groups opposing the spousal benefit, since it compelled women not to empower themselves by earning their own income.

Oh, and of course gays, even Massachusetts-married gays, are denied spousal benefits under federal DOMA.

Posted by: KipEsquire at November 3, 2005 09:43 AM

By the way, that spousal benefit is only good if the spouse of the earner is of the right age (namely, younger than the worker). I'm in a single-earner family (I'm the earner), but my husband is 13 years older than me, so the spousal benefit doesn't really do much for us.

I've got private savings in deferred annuities, and having an older husband will mean that joint annuity rates will be better for us when I annuitize.

Posted by: meep at November 3, 2005 06:49 PM

Very good post.

A quiblle: All of what you have is true if the spouses are the same age, as comment 2 sort of pointed out. For example, if the non-working spouse were three years younger than the working spouse, the benefit would be $520 instead of $650.

There IS a public-policy reason to keep the spousal benefit even after Social Security reform involving investment of only part of what is withheld goes into place. Otherwise, the working spouse's death shortly after retirement could leave the spouse who stayed at home without any income except what would come from the investment portion, which would be small. The half-benefit also "protects" second earners who earn substantially less than their higher-earning spouse. In your second example, if Mrs. Green earned only $500 a month working part-time, her benefit would be $500, half of Mr. Green's, instead of about $400 if calculated based only her earnings.

Ideally, all the SocSec money of those under 40 should be invested, so we wouldn't be having an argument about benefit levels at all in about 40 years.

Posted by: Thomas Blumer at November 4, 2005 03:59 PM