How Do Trends in Women's Labor Force Activity and Marriage Patterns Affect Social Security Replacement Rates?

Author:April Yanyuan Wu - Nadia S. Karamcheva - Alicia H. Munnell - Patrick J. Purcell
Position:Research economist with the Center for Retirement Research (CRR) at Boston College - Research associate with the Urban Institute - Professor of Management Sciences at Boston College’s Carroll School of Management and the director of the CRR at Boston College - Economist with the Office of Policy Evaluation and Modeling, Office of Research, Evaluati
Pages:1-24
Social Securit y Bulletin, Vol. 73, No. 4, 2013 1
Introduction
-
 
 


individuals and households depend partly on Social
 


 
only a few studies have focused on the impacts of
 
1





among women affect Social Security replacement rates

with trends in replacement rates for cu rrent retirees
Selected Abbreviations
 average indexed monthly earn ings
 
 early baby boomer
 full reti rement age
Gen X generation X
  
* April Yanyuan Wu is a research e conomist with the Center for Retirem ent Research (CRR) at Boston College. Nadia Ka ramcheva
is a research asso ciate with the Urban Institute. Alicia Mu nnell is the Peter F. Drucker Professor of Manage ment Sciences at Boston
    
      
Security Administrat ion.
The research pre sented in this article was supp orted by a grant (no. 5 RRC08098402-04- 00) from the Social Secur ity Administration
through the Retireme nt Research Consortium.
Note: Contents of this publi cation are not copyrighted; any item s may be reprinted, but citat ion of the Social Security Bu lletin as the
source is reques ted. To view the Bulletin online, visit our web site at http://www.soci alsecurity.gov/policy  
presented in the Bulle tin are those of the authors and do not ne cessarily represent the vie ws of the Social Security Admin istration, the
CRR at Boston College, or t he Urban Institute.
HOW DO TRENDS IN WOMENS LABOR FORCE ACTIVITY
AND MARRIAGE PATTERNS AFFECT SOCIAL SECURITY
REPLACEMENT RATES?

This article examines how women’s increased labor force participation, increase d earnings, and reduced mar-
riage rates affect Social Securit y replacement rates over time. Based on data from the Health and Retire ment
Study and Modeling Income in the Near Term, our estimates show that Social Se curity replacement rates have
dropped sharply at both the household and individu al levels, and the declines will continue for future retirees.
 
status and income levels of individuals. T he decline in replacement rates over time is largest for married couple s
with husbands having higher earnings. Increases in the labor force activ ity and earnings of women explain more
than one-third of the change. By contrast, the impact of changing mar ital patterns is relatively small. Changes to

2 http://ww w.socialsecurity.gov/policy
 
 -

 
-
 
 
use of these rich data sources to calculate replacement
 







replacement rates within cohort s by marital status and

 
decompose the replacement rate changes into con-
tributing factors such as labor force activit y; marital
patterns; and the ti ming with which Social Security

legislated gradual increase of the f ull retirement age

 
it also allows us to quantify the effect of these sweep-

 
 

-

measures when assessing the degree to wh ich the

 

therefore Social Security replacement rates alone do
not provide a complete measure of retirement income

largest source of retirement income for a majority

 
  
 
 


 
 
trends in replacement rates ac ross cohorts and within
 
discusses the decomposition procedure used to i nvesti-

 
explain the differences in replacement rates a cross

 

decrease in the proport ion of preretirement income
that Social Security replaces at both t he household

 

 

-






 
more than one-third of the difference i n replacement
 
 


 


across cohorts cannot be att ributed to differences in
 

could be driven in part by the u nderlying assumptions


cohorts who have already claimed Social Security
 -
 
2
Selected Abbreviations—Continued
 late baby boomer
 middle baby boomer
  
 prima ry insurance amount
  
   

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