The Effect of Social Security Auxiliary Spouse and Survivor’s Benefits on the Household Retirement Decision

In 2011,12.9 million age-qualifying Americans received $112 billion in spouse and survivor’s benefits from Social Security based on their husband or wife’s earnings history. The Spouse’s Benefit alone, while representing less than 4% of annual Social Security ld-age expenditures, amounts to $24 billion, which is larger than the individual 2012 budgets of 27 states, Canada’s total military expenditures ($22.5b, 2013), and the entire Federal budget for assistance to families with dependent children (TANF - $17.6b, 2012).1 Initially called the “wife’s benefit”, these benefits were introduced in 1939 when only 15% of households had two earners, compared to over 72% for households retiring after 1992.2 No study has examined the effect of both the Spouse and Survivor’s Benefits on household retirement behavior because of the complexity associated with estimating a structural model of interconnected household decisions. This study answers the question: how responsive are husbands’ and wives’ retirement decisions to Spouse and Survivor’s Benefits?