Comments on “The Effect of Social Security Auxiliary
Spouse and Survivor’s Benefits on the Household
Retirement Decision” by David Knapp
Courtney Coile
Wellesley College and NBER
Retirement Research Consortium Conference
August 7, 2014
Social Security and Retirement
• Why we care: falling LFP of older men during
period of rising SS benefits suggests possibility of
relationship
• Early literature focused on men, or women as 2nd
movers
• But many couples retire together
• More recent literature has estimated joint models
of men’s and women’s retirement decisions
(Gustman and Steinmeier, 2000, 2004), also
shown that own SS incentives affect own and
spouse’s decisions (Coile, 2004)
Contributions of This Paper
• Where this paper fits in: updated model, used to simulate
cuts to spousal/survivor benefits.
• Why spousal benefits might affect work:
– Lower earner (wife): discourages work by increasing retirement
income (income effect) and by reducing return to work
(substitution effect)
– Higher earner (husband): same income effect, opposite
substitution effect
• Findings:
– Women: increase work if eliminate benefits, small effect for
spouse benefits (0.08 years or 2%), larger for survivors (1.27
years or 32%)
– Men: decrease in work if eliminate spouse benefits (0.11 years),
larger for survivors (.53 years or 7%)
– Couples value joint life annuity provided by Social Security.
Issues Raised by Spousal Benefits
• Efficiency
– Work (dis)incentives: may affect retirement and hours worked
– May create DWL by breaking link between taxes & benefits
• Equity
– Spousal benefits create redistribution from singles to couples &
from two-earner families to single-earner families
– Unfair to women?
• Retirement income adequacy
– Spouse benefit of 50% of PIA probably designed based on
higher consumption needs of couple vs. single; survivor’s
benefit is to ensure income after worker’s death.
– Important given imperfect private annuity markets. Even with
survivor’s benefits, poverty of elderly widow(er)s much greater
than of elderly married couples.
The Origin of Spousal Benefits
• Dependent spouse and survivor benefits added to Social
Security via the 1939 Amendments
• Text from Roosevelt’s signing ceremony:
“These amendments to the Act represent another tremendous
step forward in providing greater security for the people of this
country. This is especially true in the case of the federal old age
insurance system which has now been converted into a system of
old age and survivors' insurance providing life-time family security
instead of only individual old age security to the workers in insured
occupations. In addition to the worker himself, millions of widows
and orphans will now be afforded some degree of protection in the
event of his death whether before or after his retirement.”
•
Other developed countries seem to be less likely to have
spousal benefits than survivor benefits.
Source: SSA Annual Statistical Supplement, 2013, Table 5.A4.
Source: SSA Annual Statistical Supplement, 2013, Table 5.A4.
Source of SS Benefit Entitlement
For Women 62+, 1960-2010
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1960
1965
1970
1975
Worker Only
1980
1985
1990
Dually Entitled
Source: SSA Annual Statistical Supplement 2013, Table 5.A14.
1995
2000
Spouse Only
2005
2010
Share of Dually-Entitled Recipients of Dependent Spouse Benefits Receiving $100 or More from Spouse Benefit
Total
combined
monthly Number
benefit
(dollars)
All
<200
200-250
250-300
300-350
350-400
400-450
450-500
500-550
550-600
600-650
650-700
700+
a
3,011,187
6,139
6,639
13,950
21,889
29,793
40,424
56,167
82,137
131,645
213,100
336,962
2,072,342
Percentage distribution by dollar amount of retired-worker benefit
Total
100
100
100
100
100
100
100
100
100
100
100
100
100
<200
5.1
99.7
67.2
44.1
31.3
22.9
17.6
14.2
11.1
8.6
7
4.9
2.7
200250
5
0.3
32.6
33.1
24.9
19.5
16
13.2
10.8
8.9
7.5
5.4
3
250300
300350
350400
400450
450500
Dually entitled wives and husbands
5.8
6.1
6.2
6.1
6.8
...
...
...
...
...
0.2 . . .
...
...
...
22.7
0.1 . . .
...
...
27.4
16.4
0.1 . . .
...
22.3
22.3
13
0.1 . . .
18.6
19.5
18.3
10 . . .
15.7
16.3
16.4
15.2
9.1
12.7
13.2
13.5
13.3
14.8
10.2
10.4
10.3
10.4
12.6
8.4
8.6
8.6
8.6
10.7
6.4
6.9
7.2
7.5
9.5
3.9
4.4
4.8
5
5.5
500550
550600
9.1
...
...
...
...
...
...
...
11.3
...
...
...
...
...
...
...
10.6 . . .
16.9
11.7
14.7
17.1
14
16
8
11.3
600650
650700
10.2
...
...
...
...
...
...
...
...
...
8.5
...
...
...
...
...
...
...
...
...
8.7 . . .
14.9
7.1
11.4
11.2
700+
Color Value of Spouse Benefit
$1-$50
$1-$100
$50-$150
$100 or more
Source: SSA Annual Statistical Supplement, 2013, Table 5.G5 + author’s calculations
Lose $100 Lose $100
or more or more
(conser- (aggresvative)
sive)
19.8
...
...
...
...
...
...
...
...
...
...
...
--31
42
52
59
61
59
59
62
56
62
68
73
72
68
67
67
59
68
28.7
Time to Rethink Spousal Benefits?
• Survivor’s benefits? Probably too central to
retirement income adequacy of widow(er)s.
• Dependent spouse benefits? Less clear how
central they are to poverty avoidance.
• Another option: splitting contributions
– Increases incentives to work for both spouses
– Gustman & Steinmeier (2004) predict would increase
LFP modestly, by about 2% points.
• This paper shines a light on an aspect of SS
benefits that probably merits greater attention.