Marriage has long been seen as a way to bring stability to a couple’s finances. You earn together, save together, and many decades down the road you may even qualify to receive retirement and survivor income from Social Security thanks to your beloved. But times are changing and the rules that govern these benefits were designed more than 50 years ago when fewer women worked and couples tended to tie the knot earlier. Today’s evolving marriage and work trends are leaving some future retirees vulnerable.
A new report [PDF] by the Government Accountability Office found that some retirees are more susceptible to poverty because they are waiting longer to get married, more women are working, and a shift in employer benefit plans.
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.
Over the past 50 years the number of women getting married declined 14%, and those who marry often do so later in life and for shorter periods of time.
Federal requirements for Social Security retirement income state a spouse is entitled to receive up to 50% of a retired worker’s benefit and widow is eligible to receive 100% of a deceased worker’s benefit. In the case of divorce, an individual is eligible to 50% of benefits if the marriage lasted at least 10 years.
From 1960 to 2011 the number of women who received Social Security benefits based purely on their spouse’s or deceased spouse’s work declined from 56% to 25%.
The report found that 21% of women ages 65 and older who never married fall below the poverty line, while only 5% of married women fall below the poverty line.
The changing trend in marital status isn’t the only factor causing a decline in benefit eligibility. Today, more women are entering the workforce than ever before, reducing the amount of spousal benefits they are entitled to receive. However, half of women in the United States now receive benefits based on their own work.
But for those individuals who do not work, the employer shifted from defined benefit plans to defined contribution plans creates additional vulnerability.
Spousal protections between the two plans vary greatly. In defined benefit plans, current law requires spousal consent if the participant wishes to waive the survivor annuity for his or her spouse. Under defined contribution plans there is no federal requirement to provide an annuity option and the participant can withdraw funds without consent. Meaning, individuals can withdraw all assets and spend them, leaving a widowed spouse with retirement.
While the changing trends identified by GAO reflect some positives – greater earnings and ability to save; it also shows the increased vulnerabilities retirees face today.
The GAO says these changing trends raise important questions for existing Social Security and retirement programs.
Trends in Marriage and Work Patterns May Increase Economic Vulnerability for Some Retirees [Government Accountability Office]