The Distributional Impact of Social Security Policy Options

Abstract

Using microsimulation, we estimate the effects of three policy proposals that would alter Social Security’s eligibility rules or benefit structure to reflect changes in women’s labor force activity, marital patterns, and differential mortality among the aged. First, we estimate a set of options related to the duration of marriage required to receive divorced spouse and survivor benefits. Second, we estimate the effects of an earnings sharing proposal with survivor benefits, in which benefits are based entirely on earned benefits with spouses sharing their earnings during years of marriage. Third, we estimate the effects of adjusting benefits to reflect the increasing differential life expectancy by lifetime earnings. The results advance our understanding of the distributional effects of these alternative policy options on projected benefits and retirement income, including poverty and supplemental poverty status, of divorced and widowed women aged 60 or older in 2030.