Tax Man Wants You to Choose Between Marriage and Career – Part 2
As a post-baby-boomer generation, we have all more or less come to accept that we are not likely to reap many (if any) social security benefits from the decades we will have paid into the system. Well, it gets even worse for women who work and are married.
In my previous post I mentioned the study by Edward J. McCaffery of the National Center for Policy Analysis discussing "Women and Taxes". I had previously focused on income taxes, and now it is time to turn the spotlight to our Social Security 'contributions.'
The system is set up so each spouse is automatically entitled to benefits based upon the other spouse's benefits. What does that mean?
For example, a wife who never works and never pays taxes is entitled to a retirement benefit equal to 50 percent of her husband's benefits. After he dies, she is entitled to 100 percent of his benefits. When women work and pay taxes, however, they will collect benefits based on their own contributions, or on their husband's contributions, but not both.
Say a woman elects to collect benefits based on her husband's contributions rather than her own, the US government gets to collect her Social Security tax without paying any additional benefit.
But that's not all!
Even if her husband has paid the maximum Social Security tax, the wife who works must begin paying from the first dollar she earns.
Thanks for the kick in the pants, Uncle Sam.