Retirement Security: Trends in Marriage and Work Patterns May Increase Economic Vulnerability for Some Retirees
Released: 2014-02-26T00:00:00

Letter

Background

Financial Benefits of Marriage

A number of financial benefits associated with the institution of marriage relate to the ability of a couple to pool resources, specialize, and share risk. Specifically, married people can pool resources and share costs of household goods and services, which reduces the overall cost of items that do not need to be purchased individually and frees up resources for other types of investments. In addition, within married couples, even those in which both are working, each member can specialize in certain tasks, such as managing household finances. The financial benefits of marriage can carry over into retirement as couples continue to pool resources and assist each other as the risks of disability and deteriorating health increase.

Conversely, several factors contribute to the economic vulnerability of single retirees. First, single retirees living alone do not benefit from sharing the cost of living expenses and caregiving. According to the Census Bureau’s poverty measures, a single person age 65 or older needs 79 percent of the income of a two-person household. Moreover, unmarried individuals are more vulnerable to economic shocks, such as job loss, than their married counterparts. The unmarried, especially single parents, also tend to have fewer resources available to save for retirement during their working years. For example, a 2009 study shows that among all women age 35-54, never-married women with children had the lowest level of pension plan participation among all family types. Taken together, these factors are likely to contribute to the higher poverty rates observed among unmarried individuals age 65 or older (see fig. 1).

Federal law also confers a number of benefits and protections for married spouses or former spouses.income, spouses or former spouses may receive retirement and survivor income based exclusively on marriage, independent of their own work history. This report focuses on four main sources of retirement income: (1) Social Security retirement benefits, (2) defined benefit (DB) plans, (3) defined contribution (DC) plans, and (4) individual retirement accounts In the case of certain types of retirement (IRA).provides varying types and levels of protections to spouses of workers who are eligible for Social Security, participate in an employer sponsored DB or DC plan, or own an IRA. Examples of these requirements are summarized in table 1 and described in greater detail below.

Same-Sex Marriages

See Michael J. Brien and Constantijn W.A. Panis, Annuities in the Context of Defined Contribution Plans, a study prepared for the U.S. Department of Labor, November 2011. In some limited circumstances, DC plans may be required to offer a QJSA or QPSA. 29 U.S.C. § 1055(b)(1)(B)-(C). ruling, regulation, or interpretation by federal bureaus and agencies. As a result of DOMA, enacted in 1996, same-sex couples married under state law were not covered by some of the federal requirements described above; for example, sponsors of private-sector pensions regulated by ERISA were not required to offer survivor benefits to same- sex spouses. At the time of this report’s issuance, the Executive Branch had issued some guidance and was in the process of determining what additional guidance to issue, or other actions to take, in response to the U.S. Supreme Court ruling.

State of the U.S. Retirement System and Economy

Today, working-age households face a host of challenges in saving for retirement. First, less than half (46 percent) of all workers age 16 and older participated in some form of employment-based pension plan in 2012, raising concerns about the adequacy of retirement savings among future retirees. Second, employers have been moving from DB to DC plans. Further, many of the remaining DB plans now offer lump sums as one of the form-of-payment options under the plan; participants who elect a lump sum do so in lieu of a lifetime annuity. Some DB plan sponsors have also begun offering special, one-time lump sum elections to participants who are already retired and receiving monthly pension benefits; participants who accept such offers give up their lifetime annuity. As a result of all of these trends and actions, those who do participate in an employer-sponsored plan have increasing responsibility to manage their pensions and other financial assets so that they have a sufficiently adequate income throughout retirement. However, recent research suggests that as life expectancy continues to increase, many Americans—including baby boomers, who are beginning to retire in greater numbers—may outlive their retirement assets.

The trends in the U.S. economy overall have exacerbated the challenges households face in saving for retirement. The 2007-2009 recession resulted in major stock indices falling dramatically, reducing retirement savings at a critical time for those in or near retirement. Further, the recession led to higher rates of unemployment among older workers. Prior GAO work has shown that long-term unemployment can reduce an older worker’s future retirement income in numerous ways, including reducing the number of years the worker can accumulate savings, prompting workers to claim Social Security retirement benefits early, and leading workers to draw down retirement savings to pay for living expenses during unemployment.

The Composition and Work Patterns of the Family Have Changed Dramatically in the Past 50 Years

As Marriage Has Declined, Cohabitation and Single Parenthood Have Increased

Since 1960, marriage rates in the United States have been declining. From 1960 through 2010, the proportion of the population age 15 and above that is married declined from 68 to 54 percent (see fig. 2). Over the same period, the proportion of divorced individuals increased from 2 to 10 percent, and the proportion of individuals who were never married climbed from 22 to 31 percent.a particular point in time. Therefore, those who were unmarried at one point in time might marry at a later point in time and vice versa. One reason for the rising proportion of the never-married is that many people have begun getting married later in life. According to the Census Bureau, from 1960 through 2011, the median age of first marriage increased from an estimated 20 to 27 for women and 23 to 29 for men.

The Decline in Marriage Is More Pronounced for Certain Demographic Groups

The decline in marriage has been more pronounced for certain racial and ethnic groups as well as income and education levels. Among racial and ethnic groups, blacks have experienced the greatest decline in marriage (see fig. 5). From 1960 through 2010, the percentage of married black men fell from 61 to 39 and the percentage of married black women fell from 60 to 33. Differences in marriage rates between blacks and other racial and ethnic categories persisted even after accounting for differences in income and education levels, and controlling for age. Asians were the only group, among these racial and ethnic groups, to experience an uptick in marriage since 2000.

Since the 1970s, the percentage of single-parent families has increased dramatically (see fig. 6). Specifically, from 1970 through 2012 (and from 1980 through 2012 in the case of Hispanics), the percentage of single- parent families climbed for every race and ethnicity category depicted in the figure, with the highest growth among whites (an increase of 17 percentage points, for a 170 percent increase in the percentage). However, over the entire period, the rate of single parenthood was highest among black families and continues to be more than double the rate of white families.

The decline in marriage and rise in single parenthood over this period were also more pronounced among low-income and less-educated populations. Over the period from 1960 through 2010 the percentage of married, 45- to 54-year-olds in the highest income quintile declined slightly for men (see fig. 7). In contrast, over the same period, the percentage of married, 45- to 54-year-old men and women in the lowest income quintile declined markedly.

Similarly, the percentage of single parents among 45- to 54-year-old men and women in the highest income quintile remained flat, while there was a steep rise in the percentage of single parents in the lowest income quintile during this timeframe. For education, among individuals age 18 years and older, the decline in the percentage of married individuals was steeper for those with less than a high school diploma than for those with 4 or more years of college. Conversely, the rise in single parenthood was steeper for women and men without a high school diploma in comparison to their counterparts with 4 or more years of college (see fig. 8). Nonetheless, the rate of single parenthood among college-educated women was greater than that of men with less than a high school diploma for most of the period, reflecting the higher rate of single parenthood among women overall.

Married Women Are Participating in the Labor Force at Higher Rates and Are Taking Less Time Off for Caregiving

Labor force participation among married and single men and women changed substantially over the past 50 years (see fig. 9). In 1960, labor force participation rates among the four groups (married men, single men, married women, and single women) ranged from 89 percent for married men to 32 percent for married women. The variation in workforce participation rates between single men (70 percent) and single women (59 percent) was not as wide, but was still substantial. Since then, the differences in labor force participation rates for these four groups have narrowed. In 2010, the rate was 76 percent for married men, 67 percent for single men, 63 percent for single women, and 61 percent for married women. However, as figure 9 shows, the labor force participation rates of married women have leveled off since the mid-nineties, and have declined for single women, single men, and married men over the last decade.

Labor force participation rates for women with children followed a similar trajectory to those of married women. From 1975 through 2010, labor force participation rates for women with children under age 3 grew from 34 to 61 percent (see fig. 10). For women with children under age 6, the rate grew from 39 to 64 percent. As in the case of married women, labor force participation rates for each of these groups have remained relatively level since the mid-1990s.

As a result of married women’s increasing labor force participation, the proportion of married couples with two earners has risen—along with the wives’ contributions to household income. The proportion of households in which both the husband and wife contributed to their household’s income rose from 44 percent in 1967 to 60 percent in 1994 (see fig. 11). The proportion remained at 60 percent through 2000, after which it declined to 54 percent by 2010. Part of this is likely explained by the stagnation in married women’s labor force participation rates over that period, but part of this also may be due to the rise in the percentage of married households in which only the wife works. Since 1967, the proportion of married households in which the wife was the sole earner rose more than threefold—from 2 to 7 percent. At the same time, the proportion of married households in which the husband was the sole earner declined from 36 to 19 percent. Women’s contributions to family income also grew steadily over this period. According to the Bureau of Labor Statistics, from 1970 through 2010, women’s median contribution to household income rose from 27 to 38 percent. Further, from 1987 through 2010, the percentage of households in which the wives’ earnings exceeded their husband’s rose from 24 to 38 percent.

As working women’s contributions to household income have grown, women have also tended to take less time out of the workforce to raise children. Since the 1960s, working women have left the workforce for progressively shorter intervals to care for their first born children. For children born in the late 1960s, 36 percent of working mothers took 4 years or more off to care for their first born and 56 percent took less than 6 months off (see fig. 12). For children born from 2000 through 2004, 14 percent of working women took 4 years or more off and 65 percent took less than 6 months off.

It is also noteworthy that the women represented in figure 12—those who were working prior to the birth of their first child—comprised a growing proportion of new mothers over this period, according to analysis by the Census Bureau. Specifically, an estimated 60 percent of women who had their first child between 1960 and 1965 had worked for at least 6 months or more continuously prior to having children. In contrast, an estimated 75 percent of women who had their first child between 2000 and 2005 had worked for 6 or more months continuously prior to childbirth.

Trends in Marriage and Work Patterns Have Resulted in Fewer Women Receiving Social Security Spousal Benefits and Married Women Contributing More to Household Savings

Fewer Women Are Receiving Social Security Spousal Benefits

Fewer women are receiving Social Security spousal benefits today than in the past. In 1960, nearly one-third of all women over age 62 received spousal benefits based exclusively on their spouse’s work record, according to SSA data (see fig. 13). In 2011, 9 percent of women received them. Similarly, the proportion of women over age 62 receiving widow (i.e., survivor) benefits based exclusively on their spouse’s work record declined from 23 to 16 percent over the same period. At the same time, as women’s workforce participation and earnings have risen, the percentage of women receiving benefits based solely on their own work record increased from about 39 to 48 percent. However, women’s average Social Security retired worker benefit is approximately three- quarters of men’s average retired worker benefit due to women’s lower median lifetime earnings relative to men’s. Specifically, according to SSA, in 2012, the average retired worker benefit was $1,417 per month for men and $1,103 per month for women.

In addition to the effect of rising labor force participation, the decline in women’s receipt of spousal benefits is partly due to the decline in marriage. Specifically, the proportion of women who are not eligible to receive Social Security spousal benefits because they were either never married, or divorced after less than 10 years of marriage—the length of time required for eligibility for Social Security divorced spouse benefits— has increased over the last two decades. According to analysis by SSA researchers, among women age 50-59, the percentage who were not eligible to receive Social Security spouse or widow benefits based on marital history doubled from 8 to 16 percent from 1990 to 2009 (see fig. 14). However, this growth varied greatly by race. For blacks, the rise in ineligibility for spousal or widow benefits has been more dramatic, growing from 13 to 34 percent from 1990 to 2009.whites and Hispanics, the rates of ineligibility grew less—by 8 and 6 percentage points, respectively.

Married Women’s Contributions to Household Account-Based Retirement Savings Approach Men’s in Dual- Earner Households

With women’s rising workforce participation and earnings, married women are contributing more to household account-based retirement savings, but their share of contributions varies with the work patterns of the household. Between 1992 and 2010, married women’s contributions to household account-based retirement savings (accumulated in DC plans, IRAs, and Keoghs) increased from 20 to 38 percent, on average, according to our analysis of SCF data. However, the proportion of households with any retirement savings and the average proportion of the wives’ contributions varied depending on whether the husband, wife, or both were working. In 2010, dual-earner households were the most common type of households among 55- to 64-year-olds, comprising 45 percent of married households for that age group that year (see fig. 16). These households were more likely to have account-based retirement savings than households with only one spouse working. Further, among dual-earner households with account-based retirement savings (either in DC plans, IRAs, our Keoghs), wives contributed 44 percent of the household’s account-based retirement savings, on average. For households with some account- based retirement savings in which wives were the sole earners, wives contributed 68 percent of the household’s account-based retirement savings. In contrast, wives contributed much lower shares of retirement savings—14 percent, on average—in households in which the husband was the sole earner.

Single-headed households, in contrast, continue to lag behind their married counterparts both in terms of having DC plans or IRAs and in the level of retirement savings. For the population of all households age 50- 64, 60 percent have some DC, IRA, or Keogh savings, according to our analysis of SCF data. However, this varies widely by marital status. Specifically, in 2010, an estimated 71 percent of married households age 50-64 years old had DC, IRA, and Keogh savings, while only 39 percent and 48 percent of male and female single-headed households had retirement savings, respectively (see fig. 17).levels of savings among single-headed households were much lower than for married households in this age category in 2010. For married households with retirement savings, the median savings level was $122,560. In contrast, among single men with retirement savings, the median savings level was $50,000. Among single women with retirement savings, the median level of savings was $32,800.

Over One-Third of Married Households Receiving Income from Pensions Opted Not to Receive a Survivor Benefit

Over the last decade, over one-third of married households receiving income from pensions opted not to receive a spousal survivor benefit. There are many reasons why households might decide to opt out of receiving a survivor benefit. For example, a spouse might not be expected to outlive the individual receiving the pension (the participant). Alternatively, the spouse that is expected to survive the spouse receiving the pension might have access to his or her own retirement income. According to our analyses of SCF data, the decision to opt out differed depending on whether the pension participant was the wife or the husband. Specifically, in 2010, 62 percent of men opted for a survivor benefit for their spouse while 38 percent of women did. Men’s higher likelihood of choosing survivor benefits could reflect their expectations that their wives are more likely to outlive them, or it could reflect that married women are more likely than married men to need the security of a survivor benefit because of less access to other sources of retirement income.

Several other factors were related to couples’ likelihood of opting out of a survivor benefit. Couples with longer marriages were less likely to opt out, possibly reflecting a greater sense of financial responsibility for the surviving spouse among long-lasting marriages. Households in the lowest net worth quintile are more likely to opt out of the survivor benefit than wealthier households. This finding may reflect the fact that households with limited wealth may be unable to afford the benefit reduction that comes with a survivor benefit. Lastly, households with higher levels of assets in DC plans or IRAs were less likely to opt out, perhaps an indicator of the household’s level of financial literacy and preparedness overall or simply that, with other retirement savings, the household did not need the higher benefit payment that would result from the couple opting out.

The Decline in Receipt of Spousal Benefits Is Likely to Increase Some Retirees’ Economic Vulnerability

Shifts in Marriage and Labor Force Participation Mean Fewer Future Retirees Are Expected to Receive Social Security Spousal Benefits

Looking forward, fewer women will likely receive Social Security spousal benefits because of their declining eligibility based on marital history or increased earnings relative to their husbands, according to SSA projections. More specifically, eligibility for spousal benefits is projected to decline for two reasons. First, the population of women who never marry is projected to more than double in the future. Of women born from 1936 to 1945, 4 percent are projected to never have married by age 70. In contrast, of women born from 1966 to 1975, 10 percent are projected to have never married by age 70. Second, due to the trend toward shorter marriages, fewer elderly divorcees will likely have had a marriage that lasted at least 10 years—an eligibility requirement for divorced spousal benefits. For women who had their first marriage in the early 1960’s, 83 percent of marriages lasted at least 10 years, whereas 75 percent of comparable marriages that occurred in the early 1990’s lasted this long, according to Census Bureau estimates.

Additionally, due to women’s increased lifetime earnings relative to men, fewer women who are eligible for spousal benefits based on their marital history will receive them because they will be eligible for retired worker benefits based on their own work record. Compared to current retirees, more of today’s working-age women are likely to receive Social Security benefits based exclusively on their own work history, known as retired worker benefits. Whereas in 1960, 39 percent of women age 62 and older received retired worker benefits, SSA projects that this will increase from 46 percent in 2012 to 62 percent in 2040 (see fig. 18). This increase will largely be driven by the employment and earnings patterns of married and widowed women. Over the same period, the proportion of women who are expected to receive benefits based exclusively on marriage— known as spouse-only benefits—is projected to decline from 8 to 2 At the same time, the proportion of women who are expected percent.to receive benefits based on both work history and marriage—known as dually-entitled/spouse benefits—is projected to decrease from 15 to 8 percent. In contrast with today, proportionately more married men are projected to receive survivor benefits in the future due to their decreased earnings relative to their wives. SSA projects that the proportion of men who will receive retired worker benefits will drop by 3 percentage points— from 95 to 92 percent—between 2012 and 2040. At the same time, the proportion of men who are expected to receive survivor benefits based on their marriage to higher-earning wives is projected to increase from 3 to 6 percent (see fig. 18).

Despite these changes, survivor benefits are expected to continue to play an important role for many women. Although the proportion of widows whose benefits will be based solely on marriage—known as widow-only— is projected to decrease from 6 to 2 percent by 2040, SSA projects that the proportion of women who will be dually-entitled widows will remain stable at about one-quarter of all female beneficiaries through 2040 (see fig. 18). This is in part due to the fact that many women who qualify for retired-worker benefits while their husbands are alive (because their retired-worker benefit exceeds 50 percent of their spouse’s benefit) will become dually-entitled as widows because their own retired-worker benefit does not exceed 100 percent of their husband’s benefit. For example, another analysis projects that two-thirds of wives born from 1966 to 1975 will receive widow benefits rather than their own retired worker benefit when widowed, reflecting women’s lower average lifetime earnings relative to their husbands.

In general, the trend away from women receiving spousal benefits is projected to occur across racial and ethnic groups, with the largest shift occurring among black women. According to SSA analyses among whites, blacks, and Hispanics, as of 2012, proportionally, black women were already the most likely to receive retired worker benefits (see fig. 19). Furthermore, between 2012 and 2040, black women are projected to experience the highest growth in this category. In addition, the proportions of dually-entitled/spouse white and black women are projected to decrease by about half between 2012 and 2040, with a small decrease among Hispanic women. Moreover, the proportion of women who are expected to receive widow-only benefits is projected to decrease for all three groups and, by 2040, differ by no more than two percentage points. Unlike these trends, the projections for dually-entitled widows diverge by race. More specifically, the proportion of white dually-entitled widows is projected to increase by 12 percent, while blacks will likely see a 35 percent decrease. These projections do not suggest any change among Hispanic dually-entitled widows.

Current Trends Suggest a Growing Proportion of the Elderly Will Be at Risk of Living in Poverty During Retirement

As the population that is ineligible for spousal and survivor benefits based on marital history—i.e., those who are not married or divorced without a marriage of at least 10 years—is projected to increase, the proportion of people who will depend entirely on their own earnings and savings in retirement is expected to increase as well. For many elderly, women in particular, this shift is likely to be positive, reflecting their higher earnings and greater capacity to save for retirement. However, elderly with low levels of lifetime earnings, who have no spouse, or who do not receive a spousal benefit—a group that is disproportionately represented by black women—are expected to have correspondingly lower retirement benefits. As a result, a growing proportion of the elderly—especially black women—may be at risk of living in poverty in retirement due to the higher cost of living and lower income associated with being single. As our past work has shown, elderly married individuals have higher levels of median household income and lower poverty rates than those who are never married, divorced, or widowed.income levels of this expanding group of never married elderly will continue to be lower than that of their married counterparts, according to SSA projections.

The preretirement income used in this example is the annual equivalent of the average indexed monthly earnings used to calculate Social Security benefits. relative to what a couple needs. Moreover, the proportion of dual-earner wives who are projected to not receive a survivor benefit—because of their relatively high earnings compared to their deceased husbands’—is expected to increase from 18 percent of wives who were born from 1936 to 1945 to 34 percent for wives born from 1966 to 1975.of survivor benefits generally may affect women for a longer period of time than men, due to women’s longer life expectancy. However, working women’s increased earnings and personal savings may potentially offset the lower level of survivor benefit, mitigating this issue to some extent.

Some Social Security Policy Options May Offset Effects of Changes in Marital Patterns

Past GAO work has identified a number of options suggested by experts to improve the retirement security of populations vulnerable to poverty by changing the Social Security eligibility rules or benefit structure, although each option has limitations. Some of these options focus specifically on modifying benefits for spouses and survivors, while others would affect broader populations of vulnerable individuals, and may also benefit those affected by changing marital patterns. For example, one option would change the eligibility requirements for divorced spousal benefits by reducing the required length of marriage from 10 to 7 years, with the goal of helping more of the divorced elderly remain out of poverty. Another option would increase benefit amounts for widow(er)s from the current maximum of 67 to 75 percent of the combined amount the couple had This received, with the aim of preventing poverty among widow(er)s.option could be targeted specifically toward low-income survivors by capping the surviving spouse’s benefit amount at the average retired worker benefit. However, concerns have been raised that these options may not effectively target other economically vulnerable groups like low- income Social Security retired worker recipients who never married. Further, both of these options could provide benefits to higher-income elderly who may not be particularly economically vulnerable.

Other reform options target the vulnerable population of low-income people who do not qualify for spousal or survivor benefits, such as those who never marry, and who would otherwise receive retired worker benefits. Retired worker benefits are generally calculated on the basis of a worker’s average indexed monthly earnings for the worker’s highest 35 years of earnings. While Social Security’s benefit structure is progressive, meaning that its retirement benefits replace a higher percentage of earnings for lower-income workers, a lifetime low-wage worker would still have correspondingly low benefits. Furthermore, the current benefit formula does not distinguish between low average wages caused by low lifetime earnings or low average wages caused by years of unemployment. One set of proposed options aims to increase benefit adequacy for lifetime low wage workers by increasing the level of the Special Minimum Primary Insurance Amount (also referred to as the “Special Minimum Benefit”)—a minimum Social Security benefit that is based on the number of years a worker has spent in Social Security- covered employment. The Special Minimum Benefit is paid to an eligible retired worker if it is higher than the benefit amount computed using the typical Social Security benefit formula based on the worker’s highest 35 years of earnings. Increasing the Special Minimum Benefit could help more elderly avoid poverty. However, it is difficult to effectively target lifetime low earners with this option because it is possible for high-wage earners who work part-time or sporadically to accumulate 11 years of covered employment—the minimum required under current law to qualify for the Special Minimum Benefit.

In addition to revising the Special Minimum Benefit, another option targets those who have shorter periods of covered employment because they were providing care to a family member and do not qualify for spousal benefits. More specifically, this option could change the Social Security benefit structure to provide earnings credits to caregivers (known as caregiver credits) during years in which they do not have earnings because they were providing care to children or elderly relatives. However, according to experts, this option may not reach its target population either because, for example, low-income people are less likely to take time out of the labor market to provide care for a family member. Consequently, people who have relatively higher incomes may benefit more from the creation of caregiver credits.

These policy options have costs that would place greater strains on the Social Security trust funds, which are already projected to have significantly depleted assets by 2033, at which time claimants would only receive 77 percent of their entitled benefits. The cost each option might impose varies depending on several factors, including: (1) the number of additional beneficiaries that would become eligible, (2) whether other additional adjustments—such as including a minimum work requirement for divorced spouses—would be included, and (3) their potential to offset the new costs.

The administrative burdens associated with implementing such changes are also important factors. For example, caregiver credits would be complex to administer due to the challenges associated with verifying that care was provided to a qualifying person and the amount of care that was provided.

The Shift Away from Defined Benefit Plans Also Increases the Economic Vulnerability of Elderly Spouses

The transition in private employer plan sponsorship from DB to DC plans has increased the vulnerability of spouses due to differences in the level of spousal protections between these retirement plans. While over half of U.S. workers do not participate in employer-sponsored pension plans, those with spouses who do participate may have different federal protections depending on whether their spouse participates in a DB or DC plan. In DB plans, current law requires spousal consent if the participant wishes to waive the survivor annuity for his or her spouse. In contrast, under DC plans, there is generally no federal requirement to provide an annuity option and participants do not need spousal consent to withdraw funds from the account—either before or at retirement. While spouses are generally required to be the default beneficiary of the remaining account balance upon the death of the participant, there is no protection against the assets being invested unwisely, inadvertently spent down too quickly, or simply withdrawn fully upon a job change and rolled into an IRA, with a change in beneficiary. In a worst case scenario, the spouse who participates in the DC plan could withdraw all the assets and spend them in ways that do not provide for the couple’s retirement security. While the increases in dual-earner couples and women’s coverage under DC plans have the potential to mitigate these concerns by providing alternative sources of retirement income, spouses with lower or no earnings may remain vulnerable.

We identified these policy options for DB and DC plans through interviews and consultations with retirement policy experts representing a range of perspectives and from different types of organizations including government, academia, advocacy groups, and the private sector. The listed options are not intended to be exhaustive and we are not recommending or endorsing the adoption of any particular policy option. Rather, we identify them as potential options for policymakers to consider, along with other relevant proposals, as they address retirement security issues. could slow down the retirement process. For example, one expert explained that DC plan benefit elections can be done electronically and in a matter of days. In contrast, DB plan elections typically take about 30 days, in part because the pen and paper process of obtaining notarized spousal consent in order to elect something other than a qualified joint and survivor annuity (QJSA) holds up the process. Additionally, one agency official we interviewed questioned the need for DC plans to adopt spousal consent features, pointing out that spousal protections under DB plans were instituted to protect nonworking spouses at a time when women generally did not have the same level of access to and participation in retirement plans as they do today.

Despite their relatively greater level of spousal protections, some policy advocates have also proposed revising spousal provisions that apply to DB plans. First, similar to the concern that the Social Security survivor benefit amount is too low, one expert has suggested increasing the minimum amount for DB survivor annuities from 50 percent to at least two-thirds of the prior annuity amount. Such a change would help surviving spouses better maintain their standard of living. However, such a change would entail lowering the initial annuity amount, which may be a hardship for some retirees and could deter some participants from electing the QJSA. Another policy option would seek to remedy the unequal treatment of widow(er)s under DB QJSAs. Typically, in a QJSA, the amount of the annuity that the couple receives while both spouses are alive does not change if the worker’s spouse dies first. In other words, the worker would see no change in DB household income if widowed. On the other hand, if the worker dies first, the annuity amount that the surviving spouse receives may be reduced to as little as 50 percent of the prior amount. To remedy this imbalance, two experts have suggested paying the widow(er) a predetermined amount, regardless of which spouse dies first. This “symmetric” joint and survivor annuity option is currently available for plan sponsors to offer, but they generally have not done so. Accordingly, one version of this policy option would be to make this option the normal form of benefit for married participants, requiring spousal consent to opt for a different form of payment. A symmetric joint and survivor annuity has the advantage of requiring a smaller benefit reduction on account of the survivor benefit than a standard joint and survivor annuity, which could lead to more participants taking this option. However, one agency official noted that employers expressed concern that beneficiaries with this option might not report the death of their spouse to avoid incurring any benefit reduction.

Concluding Observations

Over the last 50 years, major societal changes in the United States have had important consequences for how Americans live, work, and save for retirement. Indeed, unlike in decades past, fewer people are getting married, and those who do often marry later in life and for shorter periods. These trends have consequences for economic security because unmarried individuals are unable to take advantage of the economic benefits and efficiencies of marriage and may therefore be at greater risk of poverty in old age. Moreover, these trends have disproportionately occurred within the nation’s most vulnerable populations—low-income, less-educated, and some minorities. If these trends continue, many Americans’ economic security—both in their working years and in old age—could further deteriorate.

While marriage rates overall have declined, the role women play in the labor market has expanded. As a result, women have become major contributors to household income and household retirement savings. For many households, these gains could enhance economic security in old age. However, low-wage workers who never marry or were not married long enough to qualify for Social Security spousal benefits may not be able to accrue sufficient retirement savings to offset the lack of a spousal benefit in old age. Even within two-earner households, the Social Security survivor benefit declines as earnings for both spouses become more similar. Survivors are therefore likely to depend on other forms of retirement income to maintain their standard of living prior to their spouse’s death. Further, the shift to DC plans—which typically offer fewer protections for spouses and fewer possibilities for participants to annuitize within their plans—will likely result in more retirees outliving their assets.

These trends and their consequences raise important questions for existing programs, such as Social Security, and current protections for spouses in pension plans. As part of any future reform efforts in these areas, it will be important for policy makers to consider these trends in order to minimize poverty and ensure retirement security among the elderly.

Agency Comments

We provided a draft of this report to the Department of Labor, the Department of the Treasury, and the Social Security Administration for review and comment. While none of the agencies provided official comments, the Department of Labor and the Department of the Treasury provided technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution until 30 days after the date of this letter. At that time, we will send copies of this report to the Secretary of Labor, the Secretary of the Treasury, and the Commissioner of Social Security. In addition, the report will be available at no charge on GAO’s website at www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix III.

Appendix I: Objectives, Scope, and Methods

To analyze trends in marriage and labor force participation and their implications for retirement security, we examined: (1) the trends in and status of marriage and labor force participation in the American household; (2) how those trends have affected spousal benefits and retirement savings behavior within households; and (3) what the implications of these trends are for retirement security. This appendix provides a detailed account of the information and methods we used to answer these questions. Section 1 describes the key information sources pertaining to analyses we conducted for each reporting objective. Sections 2 and 3 provide additional information on the characteristics of the individuals and households we analyzed for Objective 2.

Section 1: Information Sources

To address our objectives, we obtained information from a variety of sources. We obtained and analyzed data from: (1) U.S. Census Bureau (Census) and Bureau of Labor Statistics (BLS) reports; (2) the Integrated Public Use Microdata Series (IPUMS) data consisting of decennial Census data and American Community Survey data; (3) the Survey of Income and Program Participation (SIPP) public use and restricted Gold Standard data, (4) the Current Population Survey; (5) the Survey of Consumer Finances (SCF); (6) SSA’s Modeling Income in the Near Term model; and (7) SSA’s actuarial estimates. Table 3 summarizes the data sources used to address each objective. To inform our data analyses for all three objectives, we obtained additional information from (1) prior GAO reports and the academic literature on trends in marriage, labor force participation, and retirement income; (2) relevant federal laws and regulations, and (3) a range of experts in the area of retirement security. This section provides a description of the information sources, how we used them, and the steps we took to ensure their reliability.

Census and BLS reports

To understand trends in marital status, single parenthood, and labor force participation over time, which are reported in Objective 1 of the report, we compiled and analyzed data from a number of published Census and BLS reports. The data in these reports draw upon Census and BLS surveys including: the U.S. Census Bureau, Current Population Reports; the Survey of Income and Program Participation; and the Annual Social and Economic Supplements, Current Population Survey.

Integrated Public Use Microdata Series (IPUMS)

To understand the relationship between income and education and trends in marriage and single-parenthood from 1960 to 2010, in Objective 1 we analyzed the Integrated Public Use Microdata Series (IPUMS). IPUMS consists of more than fifty high-precision samples of the American population drawn from fifteen federal censuses and from the American Community Surveys of 2000-2011. Together these samples constitute a rich source of quantitative information on long-term changes in the American population. IPUMS assigns uniform codes across all the samples and provides documentation for each data set.

In our analysis of IPUMS data (Figures 7 and 8), the data points for years 1960, 1970, 1980, 1990 and 2000 are from the decennial Census, and data points for the year 2010 are from the American Community Survey.

Weights and Standard Error Calculations in IPUMS Data

For all our analyses of IPUMS data, we used person weights. To estimate standard errors, we followed procedures recommended by IPUMS methodological guidance papers. We applied the appropriate design factors provided in Census Bureau publications for each year of data, taking into account the population subsamples on which we conducted our analysis.

Survey of Income and Program Participation

To answer parts of Objectives 1 and 2, we analyzed data collected through the SIPP, a nationally representative survey conducted by Census that collects detailed information on marital history and caregiving, among many other areas. Specifically, we used the data to analyze trends in (1) the characteristics of women that do not have a marriage that would qualify them for Social Security spousal benefits and (2) women’s time spent out of the workforce providing childcare. The SIPP survey is conducted in a series of national panels, each of which is collected for multiple years. Within each panel, the data are collected in a series of “waves” which take place in 4 month cycles. Within each wave, Census administers a core survey consisting of questions that are asked at every interview, and several modules relating to a particular topic. We used data from the core survey, the topical module on marital history, and the topical module on employment history from two SIPP panels, the 1996 and 2008 panels. The 1996 panel, which was collected between April 1996 and March 2000, contained approximately 40,000 interviews at the beginning of the survey. The 2008 panel, which was collected between September 2008 and December 2012, contained approximately 52,000 interviews at the beginning of the survey. For both panels, the topical module on employment history was administered in Wave 1, and the topical module on marital history was administered in Wave 2. In each wave, we analyzed data from the fourth interview month. For the 1996 panel, the Wave 1 data was collected between March and June of 1996, and the Wave 2 data was collected between July and October of 1996. For the 2008 panel, the Wave 1 data was collected between August and November of 2008, and the Wave 2 data was collected between December 2008 and March 2009.

Weights and Standard Error Calculations in SIPP

For all of the SIPP analyses, we used SIPP individual-level weights to compute point estimates. Because our analysis of the SIPP public use data involves merging data for individuals from multiple waves, we chose not to use SIPP replicate weights, as the replicate weight analysis becomes complex and computationally burdensome under these circumstances. Instead we used Stata’s survey data analysis package to declare a survey design for the data, using the following survey design variables from the SIPP data: GHLFSAM (half-sample code) to indicate the primary sampling unit, and GVARSTR (variance stratum code) to indicate the strata. GAO internal analysis has shown that using these survey design variables yields estimated standard errors that are very similar to those produced using the SIPP replicate weights.

SIPP Analysis of Women with Qualifying Marriages

To analyze the characteristics of women who had not attained a marriage that would qualify them for Social Security spousal benefits, we used information from the marital history modules of the 1996 and 2008 SIPP panels. We classified a woman as attaining a qualifying marriage if she either a) was currently married at the time of the survey, or b) was not currently married, but had previously been in a marriage that lasted for at least 10 years. We used data from the marital history module on the start and end date of marriages to determine whether a marriage had lasted at least 10 years. Because the public use data does not contain the month of marriage, we could not know precisely how long each person had been married. For women whose marriages were close to the 10-year mark, we had to choose between making our classification err on the side of overly inclusive or overly exclusive. We chose to define a marriage as lasting at least 10 years if the difference between the year of marriage termination and the year of initiation was at least 11. This means that we did not include any women whose marriage was less than 10 years. However, we did exclude some women whose marriage was exactly 10 years. For example, a woman who married in January 2000 and divorced in February 2010 would have a 10 year marriage, but our classification excluded her. We made this choice to avoid incorrectly including women with marriages less than 10 years. For example, if we defined our classification using the rule that the difference between the termination date and the start date was 10 years, we would include women who married in December 2000 and divorced in January 2010—a marriage that lasted 9 years and 2 months.

We analyzed the characteristics of men and women who had attained a marriage that would qualify them for Social Security spousal benefits by comparing qualifying marriage rates across different demographic groups (specifically, across different age, racial and ethnic groups, education level, and income categories.) In addition, to examine whether the relationship between race and qualifying marriage rates remained when controlling for income and education, we also ran several multivariate regressions on women age 55-64. We ran probit regressions of the probability of attaining a qualifying marriage for women on race with controls for income and education. We also ran probit regressions of the probability of attaining a qualifying marriage on race interacted with income, and on race interacted with education. These regressions show the negative relationship between a person being in the “black” race category and attaining a qualifying marriage remains statistically significant, even with controls for income and education, in both 1996 and 2008. Similarly, we ran probit regressions of the probability of being currently married on race with controls for education and income, and we also ran probit regressions of the probability of being currently married on race interacted with income, and on race interacted with education, for women age 55-64 in 1996 and 2008. These regressions show that the negative relationship between a person being in the “black” race category and being currently married remained significant with controls for education and income.

SIPP Analysis of Time Spent Out of the Workforce to Provide Childcare

To analyze women’s time spent out of the workforce providing childcare, we used data from the 2008 SIPP employment history module, combined with data from the fertility history module. We used the fertility history module to obtain information about whether an individual had ever had a child. This was necessary because we were looking at a person’s lifetime employment, and many older people who have taken time out of the workforce for childcare in the past do not currently have children living with them. We restricted this analysis to women age 20-62 who had worked for at least 6 months prior to the birth of their first child. We set this age range because the SIPP “time off for caregiving” questions were only asked for people in this age range. We also restricted the analysis to women whose first child was born in 2004 or earlier. This restriction was made so that all women in the analysis would have given birth at least 4 years before the survey interview. We then examined the length of time women took out of the workforce, during their first spell out of the workforce. We restricted our analysis to the first spell out of the workforce in order to mitigate the impact of older women being more likely to have had multiple children, and therefore multiple spells out of the workforce, compared to younger women. We created five categories for time spent out of the workforce. The top category was “4 or more years”. We made this the top category so that all women in the analysis were interviewed at least 4 years since the birth of their first child, and therefore would have had the opportunity to have taken off 4 or more years.

SIPP Analysis Comparing Characteristics of Female Beneficiaries

For our analysis in Objective 2 comparing the characteristics of women who receive Social Security spouse-only benefits with those receiving retired-worker benefits or dually-entitled spouse benefits, we used the 2008 SIPP restricted-use Gold Standard data. We used the Gold Standard SIPP data because, despite its advantages, the SIPP public- use data has one main limitation for our analysis. As with most survey data, SIPP public-use data are self-reported. This can be problematic for the reporting of data on income sources and the type of Social Security benefits individuals receive. For example, respondents might incorrectly report that they receive a spousal benefit, when in fact they are receiving a retired-worker benefit. To mitigate this problem, we used the 2008 SIPP Gold Standard data. Census created this file by extracting variables from the SIPP panels conducted in 2008 and merging SSA-provided administrative data including the Summary Earnings Records, Detailed Earnings Records, and the Master Beneficiary Record. Census refers to these data as the Gold Standard because they represent the available confidential micro-data that would be used for analysis by an authorized researcher working in a restricted-access facility.

Survey of Consumer Finances

To answer part of Objective 2, we analyzed data from the 2010 SCF. Specifically, we used the data to analyze (1) the decision to opt out of a survivor benefit among married households with pension income, and (2) retirement savings behavior among married and single-headed households. The SCF is a triennial, nationally representative survey from the Board of Governors of the Federal Reserve System (Federal Reserve). The 2010 SCF surveyed 6,482 households about their pensions, incomes, labor force participation, asset holdings and debts, use of financial services, and demographic information. For the purposes of this report, a household refers to the primary economic unit within a household, which the SCF refers to as a family. To estimate the age, marital status, net worth, income, and participation in a DC or DB plan, we relied on variable definitions used for Federal Reserve publications using the SCF and consulted with an agency official.

To analyze the decision to opt out of a survivor benefit, we conducted both comparisons of means and cross-tabulations, and ran some simple regression analyses using the SCF. Our regression analyses were logit models which predicted the probability of a person choosing a survivor benefit as a function of net worth and total retirement liquid assets (in separate regressions). In our regression of survivor benefit choice on net worth, we grouped net worth into quartiles, and constructed categorical variables for each quartile. We included retirement liquid assets as a continuous variable.

The SCF is subject to non-sampling error and non-response, which can influence the accuracy of point and variance estimates. To address this, the Federal Reserve provides a set of implicate data—which contain information about imputed variables—and a replicate weight file, which permits users of the SCF microdata to obtain more accurate variance estimates. We followed Federal Reserve guidance and used both the implicate data and the replicate weights when constructing our point estimates and standard error estimates, both in our univariate analyses and in our regression analyses.

Modeling Income in the Near Term

To project the distribution of Social Security beneficiary types for women into the future for Objective 3, officials from the Office of Retirement Policy at the Social Security Administration (SSA) provided GAO with projections based on simulations they conducted with the Modeling Income in the Near Term model, Version 6 (MINT6). This model is used to make projections related to individuals’ retirement income, marital trends, Social Security benefits, and poverty. The MINT6 is built from Census survey data and Social Security’s own administrative records.

Social Security Actuarial Estimates

The Office of the Chief Actuary at the Social Security Administration provided GAO with the data used in Objective 3, figure 20, which presents examples of Social Security Retirement and Survivor Income benefit levels for households with different hypothetical earnings configurations (i.e. one-earner couples, dual-earner couples with unequal earnings, and dual-earner couples with equal earnings).

Sampling Error

Estimates from the surveys described above are subject to sampling error because these surveys are probability samples based on random selections. Since each possible sample could have provided different estimates, we express our confidence in the precision of the sample results as 95 percent confidence intervals. These intervals would contain the actual population values for 95 percent of the samples that could have been drawn. In this report, we report all percentage or other numerical estimates along with their 95 percent confidence intervals. In addition, any differences between point estimates presented in this report are statistically significant at the 95 percent confidence level unless otherwise noted.

Data Reliability and Limitations

For the IPUMS, SIPP public-use and Gold Standard data, SCF and MINT6 data described above, we conducted a data reliability assessment of selected variables by conducting electronic data tests for completeness and accuracy, reviewing documentation on the dataset, or interviewing knowledgeable officials about how the data are collected and maintained and their appropriate uses. When we learned that particular fields were not reliable or were not consistently reported, we did not use them. For the purposes of our analysis, we found the variables that we ultimately reported on to be sufficiently reliable.

Nonetheless, our analysis of nationally representative survey data had several limitations. The SCF and other surveys that are based on self- reported data are subject to several other sources of non-sampling error, including the inability to get information about all sample cases; difficulties of definition; differences in the interpretation of questions; respondents’ inability or unwillingness to provide correct information; and errors made in collecting, recording, coding, and processing data. These non-sampling errors can influence the accuracy of information presented in the report, although the magnitude of their effect is not known.

We also encountered limitations specific to our study. First, in using the 2008 SIPP Gold Standard Data to analyze the characteristics of female Social Security beneficiaries, we were unable to analyze information for approximately 6 percent of the female respondents age 62 and over who did not provide their Social Security numbers because Census uses the SSN to match the information respondents provide in the SIPP survey with the information from administrative files. Second, in using the SCF to evaluate changes in the retirement savings behavior of households, we were unable to analyze the decisions of households to opt out of the survivor benefit prior to 2001 due to changes in the SCF questionnaire. In addition, in using the SCF to analyze near-retirement households, we widened the age range we examined from 55-64 to 50-64 in some instances to improve the precision of our estimates.

Literature Review and Interviews

To gain an understanding of the trends in marriage and labor force participation and their implications for retirement security, we conducted an extensive literature review and interviewed a range of experts. To identify existing studies, we used online research software to search through databases of scholarly and peer-reviewed materials for information on these topics, including articles, journals, reports, and studies dating back to 2002. In addition, we reviewed articles that were collected during the previous GAO study on women’s retirement security that contained relevant information and reviewed articles that were suggested to us by the experts we interviewed. The articles we cited in the report were reviewed for methodological adequacy by at least two GAO analysts with expertise in social science methods.

To supplement the literature review, we conducted interviews with experts. To ensure that we obtained a balanced perspective, we interviewed 49 experts with a range of perspectives and from 21 different types of organizations including government, academia, advocacy groups, think tanks and industry. We also consulted several of these experts on technical issues related to our analysis. We identified and interviewed experts who have specialized knowledge about spousal protections and retirement security in a specific area of expertise (e.g., law or social science), or who were recommended by one or more people or groups we had previously interviewed. Specifically, we interviewed federal agency officials at the Departments of the Treasury and Labor, the Social Security Administration, the Census Bureau, and the Office of Management and Budget; academic experts and subject-matter experts at Drexel University, the Employee Benefit Research Institute, Syracuse University, and the Urban Institute; and industry experts and advocates from AARP, the American Benefits Council, Global Policy Solutions, the Institute for Women’s Policy Research, the Investment Company Institute, Mercer, the National Women’s Law Center, the National Gay and Lesbian Task Force, the National Hispanic Council on Aging, the Pension Rights Center, and the Women’s Institute for a Secure Retirement.

To identify the policy options that may address retirement security issues under Social Security and private employer-sponsored plans, we reviewed past GAO reports and interviewed experts. For the Social Security options, we reviewed GAO’s prior work in this area.selected options that focus on either spousal or survivor benefits or, more broadly, on elderly populations that are vulnerable to poverty. We identified policy options that would seek to address spousal protections in private employer-sponsored DB and DC plans through interviews with retirement policy experts representing a range of perspectives and from different types of organizations including government, academia, advocacy groups, and the private sector. The Social Security, DB, and DC policy options listed in this report are not intended to be exhaustive and we are not recommending or endorsing the adoption of any particular policy option. Rather, we identified them as potential options for policymakers to consider, along with other relevant proposals, as they address retirement security issues. In addition, for this report, we did not conduct an independent analysis of the potential legal effects of these policy options.

Section 2: Analysis of the Characteristics of Social Security Spousal Beneficiaries

To compare the characteristics of female Social Security beneficiaries in Objective 2, we used a sample of beneficiaries from the SIPP Gold Standard data set. Table 4 provides descriptive information on the population of the beneficiaries we analyzed by categories of beneficiaries, including (1) all female Social Security beneficiaries (including widows); (2) retired-worker, non-widow beneficiaries; (3) spouse-only beneficiaries; and (4) dually-entitled workers. We removed the widows from the sample of retired workers so that we could compare a similar set of female beneficiaries (i.e. all non-widows).

Table 5 provides information on the wealth and income characteristics of all female Social Security beneficiaries that were married at the time of the survey. Again, by restricting the sample to women who are in similar life circumstances (i.e. married), we can obtain a more accurate picture of the wealth and income levels of spouse-only beneficiaries (who are by definition married), relative to their married counterparts in the retired- worker and dually-entitled categories.

Section 3: Analysis of the Characteristics of Married Households that Opt Out of Survivor Benefits

To understand the characteristics of married households that opt not to receive a survivor benefit for Objective 2, we analyzed a sample of married households currently receiving pension income from the SCF data. To identify these households, we used three questions from the SCF survey. Specifically, we selected households that:

Responded to “Is anyone in the household receiving pension benefits currently?” with “Yes”;

Responded to “Is this pension currently an account plan, such as a 401(k), where you could take the whole balance as one payment if you wanted to?” with “No;” and

Responded to “Is this a payment or account from a current job, past job, a disability or military benefit, former spouse’s pension, or something else?” with either “Current job pension of respondent or spouse/partner,” “Past job pension of respondent or spouse/partner (except military)” or “Disability.”

Among the households that are currently receiving pension benefits, we identified households that opted for a survivor benefit by using an additional question from the SCF survey. Specifically, we selected households that:

Responded to “If you were to die, what percent of this current retirement payment would your spouse/partner continue to receive?” with “Start at a later time, no indication of reduced benefit,” “Start at a later time, indication of reduced benefit,” “Lump sum payout,” “Full amount for limited period,” “Full amount, no time limit or time period not specified,” or “other.”

To ensure that we categorized these households appropriately, we consulted an official at the Federal Reserve.

Table 6 presents descriptive information on the characteristics of married households currently receiving pension income (presented in the third column) as well as on all households currently receiving pension income (presented in the middle column).

To understand the savings behavior of working-age households for Objective 2, we analyzed a sample of working-age households from the SCF data. Table 7 presents descriptive information on all of the working- age households and married households in this sample.

Appendix II: Selected Social Security Policy Options That May Offset Effects of Changes in Marital Patterns

This appendix provides a summary of Social Security policy options, suggested by experts and cited in past GAO reports, to improve the retirement security of vulnerable populations. The options listed are not intended to be exhaustive, and each selected policy option may include multiple proposals. In this report, we are not recommending or endorsing the adoption of any particular policy option. Rather, we identify them as potential options for policymakers to consider, along with other relevant proposals, as they address retirement security issues. Table 8 presents options that focus specifically on modifying benefits for spouses and survivors. Table 9 presents other options that would affect broader populations of vulnerable individuals, including those who do not qualify for spousal or survivor benefits, such as the never-married.

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

Michael Collins, Assistant Director; Jennifer Cook, Erin M. Godtland, Rhiannon Patterson, and Ryan Siegel made significant contributions to the report. In addition, James Bennett, Benjamin Bolitzer, Michelle Bracy, Amy Buck, David Chrisinger, Sarah Cornetto, Hedieh Fusfield, Maria Gaona, Mark Glickman, Jennifer Gregory, Kathy Leslie, Gene Kuehneman, Courtney LaFountain, Avani Locke, Grant Mallie, Ashley McCall, Sheila McCoy, Thomas McCool, Liam O’Laughlin, Carol D. Petersen, Mark Ramage, Marylynn Sergent, Frank Todisco, and Shana Wallace made valuable contributions.