Although women make up nearly half of the U.S. labor force, Social Security is still designed with a single-income couple in mind, according to the Center for Retirement Research at Boston College. In a blog post on Tuesday, CRR wrote the result of that outdated design is “a steady decline in married couples’ replacement rates.”

A CRR study published in June found that the income replacement rate for married couples born in the early 1930s was 50%. For the oldest baby boomer couples, those born in the mid-1940s, the replacement rate is about 45%. Gen X couples will only be able to replace about 39% of their income with Social Security, the report found.

“The simple explanation for the declining replacement rate is that household earnings are much higher when both spouses are working, but their Social Security pension benefits do not increase proportionally,” CRR wrote in the blog post.

Spousal benefits, equal to half of the higher-earning spouse’s total benefit, are available to a lower-earning spouse married at least 10 years. In dual income households, the lower-earning spouse will get whichever benefit is higher: their worker or spousal benefit, according to CRR’s report. Survivor benefits guarantee the survivor a benefit equal to the deceased spouse’s actual benefit.

The table below shows the impact that increased earnings have on a household’s income replacement rates from Social Security benefits and survivor benefits. It assumes both spouses retire at full retirement age, and that the husband’s benefit replaces 40% of his preretirement income.

Click to enlarge: Earnings Effects on Household Replacement Rates, Survivor Benefits

“Regardless of the wife’s earnings, the dollar amount of her survivor benefit remains unchanged. But it replaces a declining share of a couple’s combined benefits once she earns more than a third of what her husband earns,” according to the report.

A study by April Yanyuan Wu, Nadia Karamcheva, Alicia Munnell and Patrick Purcell found that the median ratio of wife-to-husband lifetime earnings for couples born in the early Depression era was just 30%, increasing to 56% for early boomers. They project that the median ratio for middle boomers will be 59% and 60% of late boomers, increasing to 68% for Gen X, who will become eligible for benefits after 2028.

“Over half of all women born in the early years of the Depression, who became eligible for benefits in the mid-1990s, were entitled to a family benefit when they first claimed,” the study found. “In contrast, less than a third of early boomer women, who became eligible for benefits between 2010 and 2015, were so entitled, and the family benefits they received replaced a smaller share of their pre-retirement earnings.”

A 2007 proposal by Melissa Favreault and Eugene Steuerle of the Urban Institute suggested restructuring family benefits by eliminating spousal and survivor benefits and increasing worker benefits by 4.5%; crediting each spouse with half the couple’s earnings when calculating their Social Security benefits; and reducing each spouse’s retirement benefits to fund their own survivor benefit, which would equal two-thirds of their combined benefits.

CRR noted that funding survivor benefits by reducing a couple’s initial retirement benefits rather than by taxing all households is more equitable to single and unmarried households, which are not eligible for survivor benefits and “tend to be less well-off than married households.”

An earning sharing proposal would likely face political challenges, as it would clearly shift benefits away from married men toward women, who tend to outlive men. It would also benefit some divorced women, who would receive a benefit when their ex-husband dies. It’s also generally seen as more complex and more costly to administer, according to CRR.  

“Social Security spousal and survivor benefits were designed to provide a basic old-age income to families in which the wife had little or no wage employment. Today, very few wives fit this mold, which has diminished the importance of Social Security family benefits as a source of retirement income,” the report concluded.

— Read Republican-Led Social Security Bill Would Raise Taxes. Yes, You Read That Right On ThinkAdvisor.

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