Over the last 50 years, the composition of the American household has changed dramatically. During this period, the proportion of unmarried individuals in the population increased steadily as couples chose to marry at later ages and cohabit prior to marriage—and as divorce rates rose (see fig. 1). From 1960 to 2010, the percentage of single-parent families also rose. In fact, from 1970 through 2012, the estimated proportion of single-parent families more than doubled, increasing from 13 to 32 percent of all families. The decline in marriage and rise in single parenthood over this period were more pronounced among low-income, less-educated individuals, and some minorities. For example, from 1960 to 2010, the proportion of married, 45- to 54-year old men in the highest income quintile declined modestly while the proportion of married men in the lowest income quintile declined from an estimated 71 to 27 percent (see fig. 2). 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, according to our estimates. In terms of education, among individuals age 18 years and older, the rise in single parenthood was steeper for those without a high school diploma in comparison to their counterparts with 4 or more years of college. Over the same period, the labor force participation rate of married women increased (see fig. 3). In 1960, labor force participation rates among married men, single men, married women, and single women ranged from 89 percent for married men to 32 percent for married women, according to our estimates. Since then, the differences in labor force participation rates for these four groups have narrowed, with labor force participation among married and single women within 3 percentage points in 2010. 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. 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 marriage and workforce patterns have changed, the U.S. retirement system has undergone its own transition. Specifically, over the last two decades employers have increasingly shifted away from offering their employees traditional DB to DC plans, and roughly half of U.S. workers do not participate in any employer-sponsored pension plan. DB plans typically offer retirement benefits to a retiree in the form of an annuity that provides a monthly payment for life, including a lifetime annuity to the surviving spouse, unless the couple chooses otherwise. In contrast, under a DC plan, workers and employers may make contributions to individual accounts. Depending on the options available under the plan, at retirement DC participants may take a lump sum, roll their plan savings into an IRA, leave some or all of their money in the plan, or purchase an annuity offered through the plan. 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 forgo 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. Taken together, the trends in marriage and workforce participation have implications for the receipt of Social Security retirement benefits, especially for women. 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. The decline in the proportion of women with marriages that qualify them for spousal benefits—coupled with the rise in the percentage of women receiving benefits based on their own work record—has resulted in fewer women today receiving Social Security spousal and survivor benefits than in the past.been more dramatic. In general, the trend away from women receiving spousal benefits is projected to continue, with the largest shift occurring among black women, according to SSA analyses. For many elderly, this shift is likely to be positive, reflecting their higher earnings and greater capacity to save for retirement. However, elderly women with low levels of lifetime earnings, who have no spouse or do not receive a spousal benefit—a group that is disproportionately represented by black women— For blacks, the rise in ineligibility for spousal or widow benefits has are expected to have correspondingly lower Social Security retirement benefits relative to those with higher incomes. These trends have also affected household savings behavior and the financial risks households face in retirement. Households with DC plans have greater responsibility to save and manage their retirement savings so that they have sufficient income throughout retirement. However, our analysis of SCF data shows that many households approaching retirement still have no or very limited retirement savings (see fig. 4). Married households—in which many women now make significant contributions to retirement savings—are more likely to have retirement savings, but their median savings are low. The majority of single-headed households have no retirement savings. Single parents, in particular, tend to have fewer resources available to save for retirement during their working years and are less likely to participate in DC plans. In addition to challenges with accumulating sufficient savings for retirement, individuals may also find it difficult to determine how to invest their savings during their working years and spend down their savings when they reach retirement. During their working years, DC plan participants typically must determine the size of their contributions and choose among various investment options offered by the plan. At retirement or separation from their employer, plan participants must decide what to do with their plan savings. Participants in DB plans also face similar decisions if the plan offers a lump sum option, including whether to take the annuity or lump sum, and if a lump sum is elected, how to manage those benefits. GAO has found that these decisions are difficult to navigate because the appropriate investment strategy depends on many different aspects of an individual’s circumstances, such as anticipated expenses, income level, health, and each household’s tolerance for risk. In addition, individuals with DC plans face challenges comparing their distribution options, in part due to a host of complicated factors that must be considered in choosing among such options. They may also lack objective information to inform these complicated decisions. In fact, while financial experts GAO has interviewed typically recommended that retirees convert a portion of their savings into an income annuity, or opt for the annuity provided by an employer-sponsored DB pension instead of a lump sum withdrawal, we found that most retirees pass up opportunities for additional lifetime retirement income. These choices coupled with increasing life expectancy may result in more retirees outliving their assets. Lastly, the transition from DB to DC plans has increased the vulnerability of some spouses due to differences in the federal requirements for spousal protections between these two types of retirement plans. For DB plans, spousal consent is required if the participant wishes to waive the survivor annuity for his or her spouse. In contrast, for DC plans, spousal consent is not required for the participant to withdraw funds from the account—either before or at retirement—and DC plans do not generally offer annuities at all, including those with a survivor benefit. While this may not be a concern among many couples, it is a concern for some, especially those who depend on their spouse for income. While the trends described above have the potential to affect many Americans, it is likely that they will impact the nation’s most vulnerable more severely. Despite the role Social Security has played in reducing poverty among seniors, poverty remains high among certain groups (see fig. 5). These groups include older women, especially those who are unmarried or over age 80, and nonwhites. Moreover, individuals nearing retirement who experience economic shocks, such as losing a job or spouse, are also vulnerable to economic insecurity. During the 2007-2009 recession, unemployment rates doubled for workers aged 55 and older. When older workers lose a job they are less likely to find other employment. In fact, the median duration of unemployment for older workers rose sharply from 2007 to 2010, more than tripling for workers 65 and older and increasing to 31 weeks from 11 weeks for workers age 55 to 64. 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 before they reach their full retirement age, Similarly, our and leading workers to draw down their retirement assets.past work has shown that divorce and widowhood in the years leading up to and during retirement have detrimental effects on an individual’s assets and income, and that these effects were more pronounced for women. As a result of the trends described above, these vulnerable populations may face increasing income insecurity in old age and be in greater need of assistance. For example, during the 2007-2009 recession, the demand for food assistance rose sharply among older adults. Specifically, from fiscal year 2006 to 2009, the average number of households with a member age 60 or older participating in the Supplemental Nutrition Assistance Program rose 25 percent, while the population in that age group rose by 9 percent. Pub. L. No. 89-73, 79 Stat. 218 (codified as amended at 42 U.S.C. §§ 3001-3058ff). past work, we noted that the national funding formula used to allocate funding to states does not include factors to target older adults in greatest need, such as low-income older adults, although states are required to consider such factors when developing the intrastate formulas they use to allocate funds among their local agencies. We found that certain formula changes to better target states with elderly adults with the greatest need would have disparate effects on states, depending on their characteristics. We have also found that lack of federal guidance and data make it difficult to know whether those with the greatest need are being served. Our findings underscore how retirement security can be affected by changing circumstances in the American household and the economy. As the composition of the American family continues to evolve and as our retirement system transitions to one that is primarily account-based, vulnerable populations in this country will face increasing risk of saving sufficiently and potentially outliving their assets. For those with little or no pension or other financial assets, ensuring income in retirement may involve difficult choices, including how long to wait before claiming Social Security benefits, how long to work, and how to adjust consumption and lifestyle to lower levels of income in retirement. Poor or imprudent decisions may mean the difference between a secure retirement and poverty. Planning for these needs will be crucial if we wish to avoid turning back the clock on the gains we have achieved over the past 50 years from Social Security in reducing poverty among seniors. Chairman Nelson, Ranking Member Collins, and Members of the Committee, this completes my statement. I would be happy to answer any questions you might have. In addition to the above, Charlie Jeszeck, Director; Michael Collins, Assistant Director; Jennifer Cook, Erin M. Godtland, Rhiannon Patterson, and Ryan Siegel made significant contributions to this testimony and the related report. In addition, James Bennett, David Chrisinger, Sarah Cornetto, Courtney LaFountain, Kathy Leslie, Amy Moran Lowe, Sheila McCoy, Susan Offutt, Marylynn Sergent, Frank Todisco, and Shana Wallace made valuable contributions. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Summary: Over the past 50 years, poverty rates among older Americans have declined dramatically, in large part due to the availability and expansion of Social Security benefits. Social Security is now the most common type of income for retirees. Social Security retirement benefits are available not only to those who qualify based on their own work history, but also to spouses, widows/widowers, and in some cases former spouses of workers who qualify. However, in recent decades, marriage has become less common, women have entered the workforce in greater numbers, and many employers have shifted from offering DB to DC plans. In light of these trends, GAO is reporting on: (1) the trends in marriage and labor force participation in the American household and in the U.S. retirement system, (2) the effect of those trends on the receipt of retirement benefits and savings, and (3) the implications for vulnerable elderly populations and current challenges in assisting them. This statement draws from previously issued GAO work and a recently issued report, which was based on an analysis of nationally representative survey data including the Survey of Consumer Finances, the Survey of Income and Program Participation, and the Current Population Survey (CPS); and a broad literature review. GAO also interviewed agency officials and a range of experts in the area of retirement security. GAO is making no recommendations. The decline in marriage, rise in women's labor force participation, and transition away from defined benefit (DB) plans to defined contribution (DC) plans have resulted in changes in the types of retirement benefits households receive and increased vulnerabilities for some. Since the 1960s, the percentage of unmarried and single-parent families has risen dramatically, especially among low-income, less-educated individuals, and some minorities. At the same time, the percentage of married women entering the labor force has increased. The decline in marriage and rise in women's labor force participation have affected the types of Social Security benefits households receive, with fewer women receiving spousal benefits today than in the past. In addition, the shift away from DB to DC plans has increased financial vulnerabilities for some due to the fact that DC plans typically offer fewer spousal protections. DC plans also place greater responsibility on households to make decisions and manage their pension and financial assets so they have income throughout retirement. As shown in the figure below, despite Social Security's role in reducing poverty among seniors, poverty remains high among certain groups of seniors, such as minorities and unmarried women. These vulnerable populations are more likely to be adversely affected by these trends and may need assistance in old age. Note: The category “White” refers to people who are white only, non-Hispanic. “Black” refers to people who are black only, non-Hispanic. “Asian” refers to people who are either Asian only, Pacific Islander only or Asian and Pacific Islander, and are non-Hispanic. Hispanic people may be any race. Percentage estimates for poverty rates have margins of error ranging from 0.6 to 8.6 percentage points. See the hearing statement for more information on confidence levels and the data.