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Michael J. Doug Wolf and Dan Black provided much encouragement of our work. Aaron Yelowitz provided very helpful comments. Working papers in this series are preliminary Looking for f married ok now circulated for review and comment. The views expressed are the authors' and do not necessarily represent the views of the Social Security Administration. The papers have not been cleared for publication and should not be quoted without permission. In this paper we focus on an age restriction for remarriage in the Social Security system to determine if individuals respond to economic incentives for marriage.
Aged widow er benefits are paid by the federal government to persons whose deceased spouses worked in Social Security covered employment. A widow er is eligible to receive benefits if she or he is at lease age If a widow er remarries before age 60, she or he forfeits the benefit and, therefore, faces a marriage penalty.
Under current law, there is no penalty if the remarriage occurs at 60 years of age or later. The Social Security rules on remarriage have changed over time. Only since have widow er s been allow to marry at or after age 60 and not face reductions in benefit amounts.
We investigate whether the age remarriage rule affects the timing of marriage and whether the elimination of the marriage penalty in encouraged widows 60 or older to marry. Our major findings are as follows. Inthere was an increase in the marriage rate of widows 60 or older. This suggests many widows in this age Looking for f married ok now chose not to marry until the marriage penalty they faced was removed. Also, in the post period, there was a drop in marriage rates immediately prior to age 60 and an increase after this age. We do not observe this pattern in the period beforeand we do not observe it for divorced women, who generally are not subject to the age remarriage rule.
These findings suggest that the age remarriage rule affects the timing of marriage and has the most influence on women who are very close to age Economic theory suggests that economic incentives play a role in family structure decisions Becker In support of this theory, there is a growing body of evidence that the implicit incentives in government programs affect decisions of whether and when to marry, cohabit, or divorce.
In this paper we focus on an age restriction for remarriage to determine if individuals respond to economic incentives for remarriage. A widow er is eligible to receive benefits if she or he is at least age We investigate whether this rule affects the marriage behavior of widows.
In addition to providing empirical evidence for economic theory, understanding the role that Social Security plays in determining marital status is relevant for at least three reasons. First, there is evidence that marriage is positively correlated with health outcomes, life expectancy, and economic well-being Waiteyet we do not know if Social Security influences the decision of whether or not to be married. Because husbands from low-income families tend to die at younger ages, the widows who are subject to these penalties are most likely to be economically vulnerable.
Infor example, the poverty rate of widows aged 65 or older was This is in sharp contrast to a 4. Congress Second, there are efficiency losses if Social Security causes women to bypass opportunities to marry simply because of the penalty implicit in the system.
For example, under current law, Social Security benefits may change purely with a change in legal marital status. If cohabitation is increasingly a substitute for legal marriage among the elderly, it is not clear that a cohabiting couple should receive different Social Security benefits than a legally married couple. As another example, the penalty may be inequitable if knowledge of the marriage penalty implicit in Social Security is not universal.
To examine the question of whether Social Security rules governing remarriage affect behavior, we examine the rates of remarriage of women around age 60 under current as well as past Social Security eligibility rules. Our provide compelling evidence that widows respond to economic incentives—delaying or forgoing marriage when the costs for such behavior are high.
In Section II we first describe the relevant Social Security laws and present an analysis of the size of the penalties under current law. Section III reviews the relevant existing literature. Section V concludes and outlines future research. Much of the discussion in this section focuses on widows who are under the age of 60 and who were married to persons who worked in Social Security covered employment. If an eligible widow claims benefits at age 60, she will receive a monthly benefit amount equal to If she defers receipt until the normal Looking for f married ok now age NRAshe will receive a monthly amount equal to percent of the deceased husband's PIA.
The current law requires that the widow be unmarried in order to claim widow benefits, unless the marriage occurred after the widow attained age However, a widow who remarries after reaching age 60 retains full claim on these benefits.
Remarriage at any time makes the widow potentially eligible for spouse benefits on her new husband's work record, so marriage is unlikely to leave a woman ineligible for Social Security. However, spouse benefits may be less generous than widow Looking for f married ok now for two reasons.
First, a spouse benefit cannot be claimed until age Looking for f married ok now and, then, Looking for f married ok now if her husband receives a Social Security benefit. Second, Social Security pays a lower rate for a spouse benefit than a widow benefit. Like widow benefits, spouse benefits are actuarially reduced if claimed before the NRA —at age 62 a spouse receives An example illustrates the Social Security rules and the potential size of the marriage penalty.
Throughout our example, we assume a year-old woman has a life expectancy of months Social Security Administration Suppose a widow considers marriage to a man two years her senior. This will continue for months that is, until her second husband dies. At that time, she is older than the NRA. If the widow does not wait until age 60 to marry, she cannot claim the widow benefit on her first husband's record.
This leaves her ineligible for Social Security benefits for the first 24 months after attaining age Assume that she files for the spouse benefit from her second husband's record at age At this point something should be said about widows who have, themselvesworked in covered employment.
A person who has worked enough in covered employment to be fully insured is eligible to receive a retired-worker benefit from Social Security as early as age Even if a widow is insured for benefits in her own right, her widow benefits can be valuable.
For example, widows may claim survivor benefits as early as age 60, two years before they can claim their retired-worker benefits. Also, Social Security rules allow a fully insured widow to claim a reduced widow benefit before the NRA and then switch to a full retired-worker benefit at the NRA if it is higher. Thus, even fully insured widows face a marriage penalty because they lose their claims to these options if they remarry before age Divorced women who were married for at least 10 years are eligible for spousal benefits on the records of their former spouses.
For divorced women whose ex-husbands are not deceased, remarriage at any age in a termination of benefits. However, under some circumstances, divorced women face marriage incentives similar to widows. A divorced woman who was married for at least 10 years to a man who worked in covered employment is potentially eligible for a surviving divorced spouse benefit upon his death.
The rules governing surviving divorced spouse benefits are essentially the same as those that govern widow benefits. Specifically, under current law, surviving divorced spouses Looking for f married ok now eligibility if remarriage occurs before age However, according to the U. Department of Health and Human Services only a small percentage 17 percent of divorced women entering their retirement years receive surviving divorced spouse benefits.
The current system reflects a series of law changes, beginning inthat altered the marriage penalties in Social Security. Beforewidows lost eligibility for widow benefits if they remarried at any time.
In July oflegislation passed that allowed widows to remarry after age 60 and keep an amount equal to half of the deceased spouse's PIA. In theory, this reduced the penalty Looking for f married ok now remarriage for those who were at least age 60 and increased the incentive to delay remarriage until age In practice, as long as the deceased and her new husband had similar work histories, this may not have been a fundamental difference because a widow was always eligible for half of her new husband's PIA as a spouse beneficiary.
The larger change in the system occurred in December ofallowing widows but not surviving divorced spouses to remarry after age 60 and to still claim a full widow benefit. This law became effective in January This further reduced the penalty for remarriage for those at least age 60 and increased the incentive to delay remarriage until age The final change occurred in April of when the legislation passed allowing surviving divorced spouses to remarry after age 60 and still claim a full survivor benefit.
The series of law changes have benefited a of individuals. Currently, married persons represent about , or 4 percent, of all Social Security aged survivor beneficiaries. In this section, we provide some perspective on how large the actual penalties are likely to be for widows who remarry before age This is a difficult Looking for f married ok now because we need complete Social Security information on the widow, her deceased husband, and her current husband.
One place these data are available is Social Security administrative data on child-in-care widow benefit beneficiaries. Social Security pays benefits to nonaged women who are caring for the minor or disabled children of deceased husbands who worked in covered employment. Because these benefits terminate when the Looking for f married ok now are no longer minors or no longer disabledthey are usually received for a limited time. However, a former child-in-care widow can reestablish entitlement on her deceased husband's work record as early as age 60 as a widow beneficiary, provided she is unmarried or her marriage occurred after she reached age Thus, a former child-in-care widow faces the remarriage incentives we have discussed.
To measure marriage penalties in Social Security we use former child-in-care widow beneficiaries who remarried prior to age 60 and who claimed spouse benefits on the records of new husbands in the period of January to June With this group, we first simulate each woman's present discounted value of the future stream of benefits at the time she reached age We assume a monthly real interest rate of 0. With regard to how widows conceptualize lifetime penalties, we believe it is likely that they use expectations about length of life as opposed to use of age-specific mortality probabilities.
Present discounted values are in year dollars. If she does not outlive her husband, she will only receive spouse benefits over her life. Next, we simulate the present discounted value of the future stream of Social Security benefits, as if people in this group had not remarried before age We assume the woman claims her widow benefit on the earlier husband's at age 60 and switches to a higher benefit at a later date if one materializes for example, if she outlives her most recent husband and the widow benefit on his record is the highest.
Table 1 presents the of these simulations. The median ratio of the present value associated with early marriage to the value associated with delayed marriage is 0. Even at the 75th percentile, a widow who marries early will receive only about 80 percent of the amount she could have received and, at the 25th percentile, a widow will receive less than 60 percent of the amount she would have received if she had delayed her marriage.
These figures warrant some additional comments. First, we examine women who did remarry before age If women with relatively low penalties are more likely to remarry, we may only have women who had low penalties in our analysis group, and therefore, may be understating the typical penalty. A widow who remarries before age 60 may have higher lifetime Social Security benefits than a similar widow who never remarries.
Second, these are for a narrow group of widows. We exclude women who were fully insured; some of these women may face a lower marriage penalty because, regardless of marriagethey may receive retired-worker benefits for most of their retirement years. And, we include only women who were widowed while they had minor or disabled children. Also, not all of the complexities of the Social Security program are reflected in the simulations.Looking for f married ok now
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Widows Waiting to Wed? (Re)Marriage and Economic Incentives in Social Security Widow Benefits