Widow Benefits Research Articles

Have We Finally Achieved Actuarial Fairness of Social Security Retirement Benefits and Will it Last?

This paper develops a framework to analyze the actuarial adjustments faced by American workers who claim Social Security benefits before or after their Full Retirement Age (FRA). We derive the conditions under which these adjustments are “actuarially fair” (or “neutral”) and develop measures to characterize the deviation from the fair form. Fair adjustment schedules are increasing at an increasing rate in take-up age and become flatter as longevity rises. We document that the actuarial fit has improved across generations. Our baseline 3% discount rate scenario estimates that the current schedule deviates from its fair form by less than 1% for average-mortality beneficiaries, compared to 5.1% and 4.0% for male and female beneficiaries in 1980, respectively. The improvement is largely due to the increases in the Delayed Retirement Credit. For men, gains in life expectancy combined with the increase in the FRA also contributed to the improved fit. We predict that the designated increase in the FRA to age 67 will have little effect on the actuarial fit. We investigate schedules reflecting (further) increases in the retirement ages, as recommended by the President’s 2010 Fiscal Commission, and propose alternatives. We also discuss results from the analysis of the adjustments to spousal and widow(er) benefits.

Love at What Price? Estimating the Value of Marriage

Using a law within Social Security that provides clear financial incentives to delay marriage, we estimate the financial value of a month of marriage. Specifically, the law provides that widows who are eligible for Social Security benefits on their deceased spouse's earnings records are eligible for benefits at age 60, unless they remarry before that age. If they remarry before that age, they cannot claim widow benefits and must wait until at least age 62 to claim spousal benefits on their new husband's record, which are typically less generous than widow benefits. To generate an estimate of what this behavior implies about the value of marriage, we use data from five panels of the Survey of Income and Program Participation linked to administrative data from Social Security. We estimate the cost of marrying before age 60 imposed by the Social Security program. We develop a model that reflects the institutional details of Social Security and generate a likelihood function that reflects that model. By taking advantage of the variation in these costs and when or whether widows remarry before age 60, we estimate the benefit of marriage to be $8000/month. These estimates appear to be reasonable in the context of the short length of time widows are willing to wait and the high value of Social Security benefits.

The Perception of Social Security Incentives for Labor Supply and Retirement: The Median Voter Knows More Than You’d Think

Executive Summary The degree to which the Social Security tax distorts labor supply depends on the extent to which individuals perceive the link between current earnings and future Social Security benefits. Some Social Security reform plans have been motivated by an assumption that workers fail to perceive this link and that increasing the salience of the link could result in significant efficiency gains. To measure the perceived linkage between labor supply and Social Security benefits, we administered a survey to a representative sample of Americans aged 50–70. We find that the majority of respondents believe that their Social Security benefits increase with labor supply. Indeed, respondents generally report a link between labor supply and future benefits that is somewhat greater than the actual incentive. We also surveyed people about their understanding of various other provisions in the Social Security benefit rules. We find that some of these provisions (e.g., effects of delayed benefit claiming and rules on widow benefits) are relatively well understood while others (e.g., rules on spousal benefits, provisions on which years of earnings are taken into account) are less well understood. In addition, our survey incorporated a framing experiment, which shows that how the incentives for delayed claiming are presented has an impact on hypothetical claiming decisions. In particular, the traditional “break-even” framing used by the Social Security Administration leads to earlier claiming than other presentations do.

How Will Declining Rates of Marriage Reshape Eligibility for Social Security?

For most older people in the United States, Social Security is the major source of income: nine out of ten people age 65 or older receive benefits, which represent an average of 41 percent of their income. Largely as a result of Social Security, poverty rates for the elderly are at an all-time low, just 10 percent. But pockets of poverty persist: older unmarried persons, blacks, and Hispanics experience poverty rates in excess of 20 percent, and over 40 percent of all older single black women live in poverty. People quality for Social Security based either on their work record or their marital status. Most older women receive noncontributory Social Security spouse of widow benefits on the basis of their marital history. For these women, marital status is more important than employment status in shaping old-age financial security. However, the trend to marry and stay married has declined over time in the United States, particularly among black women. This, we hypothesize, means that fewer women will qualify for spouse and widow benefits in coming decades. As a result, Social Security benefits will shrink among the very population that currently reports higher poverty rates, older single women, particularly black women. In this policy brief, we ask: Compared to earlier cohorts, what proportion of white, black, and Hispanic women born in the 1940s, 1950s, and 1960s will enter old age without a marriage that qualifies them for Social Security spouse and widow benefits? We find that the proportion who will reach age 62 without a qualifying marriage, and thus be ineligible for Social Security spouse and widow benefits, is increasing modestly for whites and Hispanics but dramatically for African Americans. Most of these women will be eligible for retired worker benefits under Social Security, but those benefits are not likely to be as large as the benefits they would have received as spouses and widows, had they been eligible. We then discuss a range of policy alternatives, including the possibility of a minimum benefit.

Declining Eligibility for Social Security Spouse and Widow Benefits in the United States?

Currently, two thirds of older women receive Social Security spouse and widow benefits, which are distributed on the basis of marital rather than employment status. But marriage rates are down, particularly among Black women. This study used June 1985, 1990, and 1995 Current Population Survey data to trace trends in marriage for women from five birth cohorts and to predict marital patterns for the latter three cohorts. The authors found that the proportion of women who will reach age 62 without 10-year marriages, and thus be ineligible for spouse and widow benefits, is increasing modestly for Whites and Hispanics but dramatically for African Americans. When women who were born in the 1960s reach age 62, 82% of Whites, 85% of Hispanics, and just 50% of Blacks will be eligible. The authors discuss alternative mechanisms for distributing benefits.

Marriage Penalties in Public Programs: Social Security's Child-in-Care Widow(er) Benefits

The Social Security program, like the federal income tax system, is not marriage neutral. Provisions in each public program, in effect, subsidize or penalize marriage. In this paper, we examine marriage penalties associated with Social Security's child-in-care benefi ts. This program provides fi nancial benefi ts to the minor or disabled children and spouse of a worker covered by Social Secu- rity in the event of the worker's death. Benefi ts to the widow(er) terminate upon remarriage, giving rise to marriage penalties. We document the size of these penalties, discuss their likely effects on marriage decisions, and measure the cost of repealing the termina- tion provision. Finally, because of the complex nature of the Social Security benefi t computations, we suggest that many widow(er)s may perceive larger penalties than actually exist. Providing more complete information to widow(er)s might encourage marriage, as individuals would realize that the penalties are not as large as they appear. We offer some practical suggestions on how the Social Security Administration could better inform widow(er)s as to the true size of the penalties.

Linking Benefits to Marital Status: Race and Diminishing Access to Social Security Spouse and Widow Benefits in the U.S.

Social Security retirement benefits have been noted for their capacity to redistribute benefits from higher to lower lifetime earners. However, two-thirds of older women receive spouse and widow benefits and the distributional impact of those benefits has not been well studied. Spouse and widow benefits are distributed on the basis of marital rather than employment status and generally require recipients to be either currently married or to have had a ten-year marriage. The unprecedented retreat from marriage, particularly among black women, means the distributional impact of these benefits changes dramatically for each cohort that enters old age. This paper uses June 1985, 1990 and 1995 CPS supplement data to trace the decline in marital rates for women for five cohorts. The main question is what proportion of women in each cohort will reach age 62 without a ten-year marriage and thus be ineligible for spouse and widow benefits. We find that the proportion who will not be eligible as spouses or widows is increasing modestly for whites and Hispanics but dramatically for African Americans. The growing race gap in marital rates means that older black women will be particularly unlikely to qualify for these benefits.

Widows Waiting to Wed?

In this paper we focus on an age restriction for remarriage in the Social Security system to determine if individuals respond to economic incentives for marriage. Aged widow(er) benefits are paid by the Federal government to persons whose deceased spouses worked in Social Security covered employment. A widow(er) is eligible to receive benefits if she or he is at least age 60. If a widow(er) remarries before age 60, he or she forfeits the benefit and, therefore, faces a marriage penalty. Under current law, there is no penalty if the remarriage occurs at 60 years of age or later We investigate whether this rule affects the marriage behavior of widows. Specifically, we examine the rates of remarriage of women around age 60 under current as well as past Social Security eligibility rules using data from the Vital Statistics. Our results provide compelling evidence that this group of women respond to economic incentives when considering the decision to remarry. First, the 1979 law change that eliminated the marriage penalty for those at least age 60 resulted in a large increase in the marriage rate for widows at

Widows Waiting to Wed? (Re)Marriage and Economic Incentives in Social Security Widow Benefits

Widows Waiting to Wed? (Re)Marriage and Economic Incentives in Social Security Widow Benefits

Labor Force Trends and Future Social Security Benefits

Trends in employment and earnings patterns in the population, particularly the increase in the number of two-earner couples, create a hurdle for the long-term modeling of Social Security, because benefits are intricately related to employment and earnings. The spouse and widow benefits of women who are eligible for their own retired worker benefits are particularly problematic because of the dual entitlement reduction under which a woman's spouse or widow benefit is reduced, dollar for dollar, by any increase in the woman's retired worker benefit. This paper examines a technique that allows long-term macromodeling of the economy to incorporate these intricate effects. The technique makes use of a microsimulation model of individual workers, with the microsimulation model specified in such a way that the earnings and employment of its individuals can be constrained to meet specified calendar-year projections for aggregate employment and earnings. The technique is used to carry out a 75-year analysis, examining the sensitivity of Social Security taxes and benefits to changes in women's employment and earnings under three scenarios: an increase in women's employment holding average earnings constant, an increase in women's earnings holding employment constant, and a simultaneous increase in both employment and average earnings. As expected, the dual entitlement reduction limits the increase in benefits for many of the women. Over the 75-year period the increase in payroll taxes from women's higher earnings will more than offset the increase in benefits from their earnings. The simulations indicate, however, that there is an additional effect from higher women's earnings through the national average wage indexing series, which is used to set the overall level of benefits. By raising the national wage index, higher women's earnings can increase the overall level of benefits, thereby offsetting some or all of the increase in payroll taxes.

Social Security Reform with a Focus on the Netherlands

The essay discusses the general issues of labor market incentives and of adapting to the trend to longer lives, including legislated adaptations in Chile, Italy, Sweden, and the US. For the Netherlands there are two concrete proposals – that the AOW fund hold a diversified portfolio and that workers have the option of delaying the start of AOW benefits in order to receive larger benefits for themselves and surviving spouses. Three issues are identified for evaluation and monitoring: whether widow benefits from private pensions might become too small in the future (given the introduction of choice between higher worker benefits and survivor benefits), whether final-pay pensions should be modified to indexed career-average pensions (to improve labor mobility and fairness), and whether there should be some automatic adjustments for cohort life expectancy.

Economic Change at Mid-Life Widowhood: A Longitudinal Analysis

Widowhood has been found to have a negative association with the financial well-being of women in cross-sectional studies. In this study cross-sectional and longitudinal analyses are compared in a national sample of women widowed in mid-life. Results of the cross-sectional analysis replicate previous findings, but longitudinal comparisons fail to demonstrate a significant decline in income or financial well-being upon the death of spouses. The data also show the anticipated shift toward major reliance on earnings of the widow and Social Security benefits. Longitudinal findings suggest that many sample members were already poor prior to widowhood; consequently, widowhood is not the major cause of poverty in this group.

Spouse and Survivor Benefits

Recommendations by the HEW Task Force on the Treatment of Women under Social Security indicate that dependent's benefits paid to aged wives and widows of retired workers may be altered, if not eliminated for future cohorts of retirees. The impact of their elimination will depend on the characteristics of persons who would otherwise have been eligible to receive these benefits. Spouse and widow benefits were initially enacted to transfer income to these presumably needy groups. Thus, the appropriate test of these benefits' fulfilling the original antipoverty goals of their passage is the extent to which they are available to relatively low-income aged. This paper examines the income redistributional effects of the additional benefits available to wives and widows, above those for which they are eligible as retired workers. The results show that additional benefits paid to wives do not target aged poor couples and cannot be justified on antipoverty grounds.