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Social Security: Disability Benefits can be Higher than Retirement Payments

Feb 1, 2011

Social Security - Q: I have a 40-year-old friend who is getting Social Security disability benefits. I know that she was averaging only about $20,000 per year while she was working. And she told me she is getting $1,600 per month from Social Security. I am 63 years old and I get about $1,400 per month in Social Security retirement benefits. I worked all my life, and when I retired, I was making about $30,000 per year.

Why is my friend getting more than I am from Social Security, even though I made more money and paid Social Security taxes for many more years than she did?

A: It really doesn't seem fair, does it? But it all has to do with how Social Security benefits are figured.

A Social Security benefit is intended to replace a portion of a person's average earnings during his or her working lifetime. Although you were making more than she was at the time you both stopped working, your friend's average earnings during her shorter working life were probably greater than your average earnings during your longer working career. Does that make sense? If it doesn't, maybe a look at some actual numbers will help.

Your Social Security benefit was based on your average wage during your highest 35 years of work. (And that formula applies to all retirees.) For most people, their highest 35 years of earnings were their last 35 years. Let's say you retired in 2010. That means your Social Security benefit was based on your earnings between 1975 and 2010. I've got a hunch that back in the 1970s, you were selling fries at McDonald's (or some similar job) making minimum wage. Factoring in all those low-earning years from more than three decades ago, your overall average lifetime wage will be reduced, which in turn lowers your Social Security benefit.

On the other hand, your disabled friend's Social Security benefit was based on fewer years of earnings. The formula is complicated, and I won't get into it here. But assuming she started getting benefits last year, my guess is that they went back about 15 years to figure her disability payment. That means they based that payment on her earnings between 1995 and 2010. And it is likely that her average wage between 1995 and 2010 is greater than your average wage between 1975 and 2010. So, that's one reason her Social Security benefit is higher than yours.

The other reason is that she is receiving a full payment while yours is reduced. Social Security disability benefits are always paid at the full (100 percent) rate. But your retirement benefit was reduced about one-half of 1 percent for each month you started those payments before age 66.

Q: My good friend is in her early 60s and is struggling to get along on a very small Social Security retirement benefit. She was married to a man for more than 25 years, but they are divorced. He has remarried and is well off, but he refuses to give my friend his Social Security number. He won't permit her to file for any benefits as his ex-wife. Is there anything she can do?

A: Yes, she can file for divorced wife's benefits on her ex's record without having the guy's Social Security number. And she certainly doesn't need his permission to do so. Social Security Administration personnel will be able to find his number and look up his records, if they can get a bit of identifying information from the ex-wife.

If she can give them her former husband's name, his date and place of birth and his parents' names, they should be able to find his SSN and she should get divorced wife's benefits on his Social Security account. And then let's hope the old goat has a heart attack when he finds out. That way, your friend will receive even higher divorced widow's benefits!

Q: I am 72 and getting benefits as a wife on my husband's Social Security record. He is 84. I spent my entire adult life as a wife and mother and never paid into Social Security. But I recently started working. Someone told me the money I'm paying in Social Security taxes is doing me no good. Is that true? And if so, can I get out of paying those taxes?

A: Yes and no! I mean, yes, the money you are paying in Social Security taxes will never come back to you in the form of higher Social Security benefits. Unless you work long enough, like maybe about 25 years, your own benefit could then finally surpass the amount you're getting as a spouse. But of course, that's not going to happen.

And no, you can't get out of having Social Security payroll taxes deducted from your earnings. So how about if you think of it this way: the money you pay in school taxes, for example, doesn't do you any good, but it helps someone else -- and your community as a whole. And now the money you are paying in Social Security taxes isn't doing you any good, but it's also helping someone else -- and your country as a whole.


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