Thursday, October 15, 2009

What every stay-at-home mom should know about Social Security and Medicare

The following post, which was uploaded in May, is based in part on the “Money Matters” chapter of my book, The Stay-at-Home Survival Guide. I am re-posting the article now because I'm speaking to a stay-at-home moms club later this month about personal and family finances, and just today a reader emailed me with a question about her future Social Security and Medicare eligibility. I was able to answer her question by visiting, which has a lot of information specific to the complicated retirement issues that impact women.

Every May, in honor of Mother's Day, announces how much the work of a stay-at-home mother is worth. Her annual salary, or value, since in the real world the salary is a fantasy: A whopping $122,732. (And that’s based on only 10 job functions typically performed by stay-at-home moms.) It’s nice to be valued.

What isn’t so nice is that although stay-at-home moms are given lip service about their value and importance, full-time stay-at-home motherhood is not recognized in any way as the job it really is. While I’m not saying stay-at-home mothers (and dads) should be paid a salary, per se, it sure would be nice if those years as primary caregivers of young children weren’t so potentially damaging to a full-time parent's future Social Security and Medicare benefits.

(A caveat: For purposes of this discussion, let’s just assume that Social Security will be around when you become eligible to collect retirement benefits. Currently, the age at which people born after 1960 can collect full benefits is 67. Please put out of your mind the possibility that by time you’re 67-years-old the full-benefit age will be 92.)

Here’s the rub: A person’s Social Security benefit—which is the value of the monthly check she will receive in old age—is based on having a total of 35 years of paid employment. F
or each year worked, a certain number of “credits” are provided. You need to have 40 credits to be eligible for your own Social Security retirement and Medicare health insurance benefits. (At the current four credit maximum per year, that requires at least 10 years of employment.) To calculate the value of a person’s retirement benefits, the Social Security Administration totals the earnings from the highest 35 years of income, and then divides that number by 35. Using various rate sheets and tables, that sum is then translated into a benefit. Men generally have no problem meeting or exceeding a work-life of 35 years (unless of course they die). Women have a tougher time.

The unfairness of the benefits formula is that a woman gets zero — zippo, nada, a big N.O.— benefit or recognition for the years she works around the clock as a stay–at–home mom. As women are more likely than men are to step in and out of the workforce, a woman’s 35 years often includes many years of zero or near zero income, which drags down her average and is one of many reasons a woman’s Social Security check is commonly smaller than a man’s.

Naysayers argue that because stay-at-home moms don’t earn an income, they don’t contribute to the economy or the Social Security coffers. A counterargument is that stay-at-home mothers do contribute mightily to the economy as consumers and as part of a taxpaying couple. Because there is no “official” benefits-related recognition of the work of stay-at-home mothers, women (as well as an increasing number of men) are essentially having to choose between their children’s immediate needs and their own need for financial security in old age. Politicians, religious leaders and society-at-large drone on about the importance of family, and the importance of parents, especially mothers, to be at home caring for their children. If we value children, and value women, we need to figure out a way that parenthood doesn't financially harm women.

In an article for the advocacy organization Mothers and More (, its president at the time, Kristen Maschka, calculated that by leaving the workforce for seven years to stay home with her child, she would be forfeiting $2,000 a month in future Social Security benefits. “Assuming I live to be eighty-seven,” she writes, “that’s nearly half a million dollars.” (Another great advocacy organization for moms is

The cost of an unpaid stay–at–home career—or a paid career that makes accommodations to parenting responsibilities—varies for each woman.

You can calculate both your future benefits and losses by visiting

In lieu of recognizing that stay–at–home parenting is work, the government allows a married woman to collect off of her spouse’s work history instead, if receiving 50 percent of his benefit amount calculates to being more than 100 percent of hers. (And this scenario is also true in the other direction, with the husband collecting based on his wife’s earnings.) So if a woman and her spouse make it to retirement together and an anniversary of more than a decade of marriage, she can collect either her benefit or, if he's of Social Security age, an amount that’s half of his. For example: If John gets $5,000 a month, Jane gets $2,500, so as a couple living together they bring in $7,500 monthly.

A divorced woman can collect spousal benefits, so long as the marriage lasted 10 years. In such a scenario, a divorced Jane who had 10-plus years vested in a marriage can still claim the 50 percent spousal benefit, but since she’s no longer in the same household as John, unless she remarries, the Social Security income coming into her home is just $2,500 instead of the $7,500 she would have had access to had the marriage not dissolved.

Unfortunately, because of the decade rule, a woman who stayed home with her children for nine years of her nine-year marriage receives no spousal-linked Social Security or Medicare benefits. An unmarried stay–at–home parent who has children with a partner has no protection. If she has her own work history, she may have access to a benefit of her own. But if she were a teenage or young mother and continues to have a minimal employment history, she’s at risk of becoming a very poor old lady.

Another inequity: Stay-at-home parents don’t qualify for private disability insurance because such insurance is for replacing income from work, but sometimes it's their work that needs replacing. If something terrible happens to a stay-at-home mom and she can’t work for a year (as a stay-at-home mom) will her family be able to afford the $122,732 needed to hire her replacement?

For more information about your Social Security eligibility and benefits, visit the Social Security Administration website at or

Monday, October 12, 2009

Make sure your baby isn't too fat to be insured

Incredibly enough, a health insurance company in Colorado denied coverage to a four-month-old baby because the child measures in the 99th percentile for weight. Born at 8-1/4 pounds, Alex Lange (left, in a photo provided to the media by his family) is now about 17 pounds and 25 inches long. Click here to read the story from The Denver Post.

Apparently, health insurance policies sold on the individual market routinely deny coverage to babes who top the 95th percentile. Chubby babies whose parents have access to insurance through an employer, or other group plan, cannot be denied coverage as those policies are typically not allowed to discriminate or make exclusions for preexisting conditions.

We've all heard that there's an obesity epidemic in the United States, even among children. That's one of the many reasons people need health insurance and medical care, especially preventive care. But the way our insurance and medical system works, those in need of care are precisely the ones for-profit insurers don't want to insure.

By the way, after all the bad press received due to denying insurance to (big) baby Alex, the insurer changed its "mind." (As if companies, not profit-seeking people, make corporate decisions.)
"If health care reform occurs, underwriting will go away. We do it because everybody else in the industry does it," said Dr. Doug Speedie, medical director at Rocky Mountain Health Plans, about the company's initial denial of insurance.

Sounds like underwriting needs to go away.

P.S. The website MOMocrats just
posted an essay I wrote for them
about health insurance.
Click here to link there.


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