Fewer retirees are expected to receive spousal or survivor benefits from Social Security and private employer-sponsored pension plans in the future, increasing their economic vulnerability, according to a new government report.
The report, released Wednesday by the Government Accountability Office, noted that over the past 50 years, the composition and work patterns of the American household have changed dramatically. During this period, the proportion of unmarried and never-married individuals in the population increased steadily as couples chose to marry at later ages and live together prior to marriage. At the same time, the proportion of single-parent households more than doubled.
“These trends were more pronounced for individuals with lower levels of income and education and for certain racial and ethnic groups,” said the report. “Over the same period, labor force participation among married women nearly doubled.”
Taken together, these trends have resulted in a decline in the receipt of spousal and survivor benefits and married women contributing more to household retirement savings.
From 1960 through 2011, the percentage of women aged 62 and older receiving Social Security benefits based purely on their spouse’s (or deceased spouse’s) work record declined from 56 to 25. At the same time, the percentage of women receiving benefits based purely on their own work records rose from 39 to 48.
Further, as of 2010, among married households receiving pensions, 40 percent had elected not to receive a survivor benefit. Rising labor force participation among married women enabled them to contribute more to household retirement savings. From 1992 to 2010, married women’s average contributions to household retirement savings increased from 20 to 38 percent.
In the future, fewer retirees will receive spousal or survivor benefits from Social Security and private employer-sponsored pension plans, increasing vulnerabilities for some. Eligibility for Social Security spousal benefits among women is projected to decline, in part, because fewer women are expected to qualify based on marital history and more are expected to qualify for their own benefit based on their own work record.
For many women, this shift will be positive, reflecting their greater earnings and capacity to save for retirement. However, women with low levels of lifetime earnings and no spouse or spousal benefit may face greater risk of poverty in old age.
Marriage has historically helped protect the financial health of couples and surviving spouses in old age, the GAO noted.
“Based on their marriage, and independent of their own work history, spouses may receive retirement and survivor income through Social Security and some employer-sponsored pension plans,” said the report. “Many of the federal requirements governing these benefits were developed at a time when family structures, work patterns and pensions were very different from what they are today.”
In recent decades, marriage has become less common, more households have two earners rather than one, and many employers have shifted from defined benefit plans to defined contribution plans.
For private plans, the shift from defined benefit to defined contribution plans increases the vulnerability of spouses because of different federal protections for spouses under these plans. DB plans are required to offer survivor benefits, which can only be waived with spousal consent. In contrast, DC plan participants generally do not need spousal consent to withdraw funds from the account.
For the report, the GAO analyzed nationally representative survey data, including the Survey of Consumer Finances, the Survey of Income and Program Participation, and the Current Population Survey. It also conducted a broad literature review and interviewed agency officials and a range of experts in the area of retirement security. The GAO made no recommendations in the report.
The Senate Special Committee on Aging plans to convene a hearing next Wednesday on senior poverty, and GAO officials will be on hand to discuss the report’s findings with lawmakers. The GAO report was requested by the committee last year following a hearing that examined women’s retirement security.
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