Courtney Coile Wellesley College and NBER Retirement Research Consortium Conference August 7, 2014

1. Comments on “The Effect of Social Security Auxiliary Spouse and Survivor’s Benefits on the Household Retirement Decision” by David Knapp Courtney Coile Wellesley College and NBER Retirement Research Consortium Conference August 7, 2014

2. Social Security and Retirement • Why we care: falling LFP of older men during period of rising SS benefits suggests possibility of relationship • Early literature focused on men, or women as 2nd movers • But many couples retire together • More recent literature has estimated joint models of men’s and women’s retirement decisions (Gustman and Steinmeier, 2000, 2004), also shown that own SS incentives affect own and spouse’s decisions (Coile, 2004)

3. Contributions of This Paper • Where this paper fits in: updated model, used to simulate cuts to spousal/survivor benefits. • Why spousal benefits might affect work: • Lower earner (wife): discourages work by increasing retirement income (income effect) and by reducing return to work (substitution effect) • Higher earner (husband): same income effect, opposite substitution effect • Findings: • Women: increase work if eliminate benefits, small effect for spouse benefits (0.08 years or 2%), larger for survivors (1.27 years or 32%) • Men: decrease in work if eliminate spouse benefits (0.11 years), larger for survivors (.53 years or 7%) • Couples value joint life annuity provided by Social Security.

4. Issues Raised by Spousal Benefits • Efficiency • Work (dis)incentives: may affect retirement and hours worked • May create DWL by breaking link between taxes & benefits • Equity • Spousal benefits create redistribution from singles to couples & from two-earner families to single-earner families • Unfair to women? • Retirement income adequacy • Spouse benefit of 50% of PIA probably designed based on higher consumption needs of couple vs. single; survivor’s benefit is to ensure income after worker’s death. • Important given imperfect private annuity markets. Even with survivor’s benefits, poverty of elderly widow(er)s much greater than of elderly married couples.

5. The Origin of Spousal Benefits • Dependent spouse and survivor benefits added to Social Security via the 1939 Amendments • Text from Roosevelt’s signing ceremony: “These amendments to the Act represent another tremendous step forward in providing greater security for the people of this country. This is especially true in the case of the federal old age insurance system which has now been converted into a system of old age and survivors' insurance providing life-time family security instead of only individual old age security to the workers in insured occupations. In addition to the worker himself, millions of widows and orphans will now be afforded some degree of protection in the event of his death whether before or after his retirement.” • Other developed countries seem to be less likely to have spousal benefits than survivor benefits.

6. Source: SSA Annual Statistical Supplement, 2013, Table 5.A4.

7. Source: SSA Annual Statistical Supplement, 2013, Table 5.A4.

8. Source: SSA Annual Statistical Supplement 2013, Table 5.A14.

9. Source: SSA Annual Statistical Supplement, 2013, Table 5.G5 + author’s calculations

10. Time to Rethink Spousal Benefits? • Survivor’s benefits? Probably too central to retirement income adequacy of widow(er)s. • Dependent spouse benefits? Less clear how central they are to poverty avoidance. • Another option: splitting contributions • Increases incentives to work for both spouses • Gustman & Steinmeier (2004) predict would increase LFP modestly, by about 2% points. • This paper shines a light on an aspect of SS benefits that probably merits greater attention.