Is Alicia Munnell Wrong About Spousal Social Security Benefits

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Small Law Survivor
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Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by Small Law Survivor » Wed Oct 09, 2019 6:18 pm

I was listening to Boston College economist Alicia Munnell discuss the "retirement crisis" on Morningstar's "Long View" podcast. She said (twice, I believe) that one reason for the crisis is that spouses no longer receive a spousal benefit - they are limited to their own benefit, which in the case of women is small due to a disrupted work career (children, parent care) and lower lifetime earnings. This is one of the "death of a thousand cuts" she listed that is contributing to the crisis.

If the spousal benefit has been eliminated, that's news to me. Did anyone else hear this? Does anyone have any idea what she's talking about?
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livesoft
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by livesoft » Wed Oct 09, 2019 6:24 pm

She has been wrong about so many things that I wouldn't even bother asking if she is wrong about this.
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by curmudgeon » Wed Oct 09, 2019 6:52 pm

I read the transcript. The point she was making is a little obscure and stretched, but not totally wrong. Her point was that a single-earner couple got a relative boost in SS retirement benefit (compared to their pre-retirement income) by the addition of the spousal benefit. A two-earner couple won't see that boost (unless one of them had very low income). I don't think it's a terribly relevant point, and I wasn't all that impressed with the rest of the interview, but we all have our perspectives.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by Stinky » Thu Oct 10, 2019 7:23 am

curmudgeon wrote:
Wed Oct 09, 2019 6:52 pm
I wasn't all that impressed with the rest of the interview,
I listened to about 15 minutes of the podcast, and then deleted the episode. I decided that any of the 15 other podcasts on my play list would be more useful than continuing to listen to Alicia Munnell.
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by Small Law Survivor » Thu Oct 10, 2019 7:36 am

curmudgeon wrote:
Wed Oct 09, 2019 6:52 pm
I read the transcript. The point she was making is a little obscure and stretched, but not totally wrong. Her point was that a single-earner couple got a relative boost in SS retirement benefit (compared to their pre-retirement income) by the addition of the spousal benefit. A two-earner couple won't see that boost (unless one of them had very low income). I don't think it's a terribly relevant point, and I wasn't all that impressed with the rest of the interview, but we all have our perspectives.
Still unsure what her point was, but I'm relieved to hear that the spousal benefit hasn't been eliminated. I thought I'd missed something, and since we're counting on that benefit to kick in shortly, I was a bit concerned. Thanks!
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by JoeRetire » Thu Oct 10, 2019 7:40 am

Small Law Survivor wrote:
Wed Oct 09, 2019 6:18 pm
If the spousal benefit has been eliminated, that's news to me.
The spousal benefit has not been eliminated. I'm sure she didn't actually say that it has.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by ObliviousInvestor » Thu Oct 10, 2019 7:46 am

JoeRetire wrote:
Thu Oct 10, 2019 7:40 am
Small Law Survivor wrote:
Wed Oct 09, 2019 6:18 pm
If the spousal benefit has been eliminated, that's news to me.
The spousal benefit has not been eliminated. I'm sure she didn't actually say that it has.
Indeed, she did not.

Her point was that, if you have a two-spouse, two-earner household, then relative to a two-spouse, one-earner household, the spousal benefit goes away. That is, nobody gets a spousal benefit. Couple is earning twice as much, but does not get twice the amount of Social Security benefits. (And so the replacement rate -- the part of pre-retirement income that Social Security replaces -- goes down.)

https://www.morningstar.com/podcasts/the-long-view/24
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by JoeRetire » Thu Oct 10, 2019 7:51 am

ObliviousInvestor wrote:
Thu Oct 10, 2019 7:46 am
JoeRetire wrote:
Thu Oct 10, 2019 7:40 am
Small Law Survivor wrote:
Wed Oct 09, 2019 6:18 pm
If the spousal benefit has been eliminated, that's news to me.
The spousal benefit has not been eliminated. I'm sure she didn't actually say that it has.
Indeed, she did not.

Her point was that, if you have a two-spouse, two-earner household, then relative to a two-spouse, one-earner household, the spousal benefit goes away. That is, nobody gets a spousal benefit. Couple is earning twice as much, but does not get twice the amount of Social Security benefits. (And so the replacement rate -- the part of pre-retirement income that Social Security replaces -- goes down.)

https://www.morningstar.com/podcasts/the-long-view/24
Exactly. There's nothing new about this - it's always been the case.

What she was likely suggesting is that more families depend on two relatively equal incomes these days. And that makes the spousal benefit less likely to have any value. Of course the survivor benefit could still have some value.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by Rick Ferri » Thu Oct 10, 2019 7:57 am

ObliviousInvestor wrote:
Thu Oct 10, 2019 7:46 am
JoeRetire wrote:
Thu Oct 10, 2019 7:40 am
Small Law Survivor wrote:
Wed Oct 09, 2019 6:18 pm
If the spousal benefit has been eliminated, that's news to me.
The spousal benefit has not been eliminated. I'm sure she didn't actually say that it has.
Indeed, she did not.

Her point was that, if you have a two-spouse, two-earner household, then relative to a two-spouse, one-earner household, the spousal benefit goes away. That is, nobody gets a spousal benefit. Couple is earning twice as much, but does not get twice the amount of Social Security benefits. (And so the replacement rate -- the part of pre-retirement income that Social Security replaces -- goes down.)

https://www.morningstar.com/podcasts/the-long-view/24
The same can be said for children. A person with ten children pays the same as a person with no children on the same income. However, within a family, a child can receive up to half of the parent's full retirement or disability benefit. If a child receives survivor benefits, they can get up to 75 percent of the deceased parent's basic Social Security benefit.

Social Security is an insurance program, not a retirement program. Lots of things are covered, and that makes it weird.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by ObliviousInvestor » Thu Oct 10, 2019 8:00 am

Rick Ferri wrote:
Thu Oct 10, 2019 7:57 am
Lots of things are covered, and that makes it weird.
This is a good summary of so much about Social Security.
Mike Piper, author/blogger

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by JoeRetire » Thu Oct 10, 2019 8:07 am

Rick Ferri wrote:
Thu Oct 10, 2019 7:57 am
The same can be said for children. A person with ten children pays the same as a person with no children on the same income. However, within a family, a child can receive up to half of the parent's full retirement or disability benefit. If a child receives survivor benefits, they can get up to 75 percent of the deceased parent's basic Social Security benefit.

Social Security is an insurance program, not a retirement program. Lots of things are covered, and that makes it weird.
More reasons why analyzing Social Security benefits is far more nuanced than simply as a "replacement rate".

As always, it depends.

Alicia Munnell was not wrong about spousal Social Security benefits. The OP just didn't understand the point she was trying to make. It's hard.

Fortunately we have experts like Mike Piper who write, explain, and develop tools to help us understand.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by montanagirl » Thu Oct 10, 2019 8:11 am

I thought that SSA did change it s that you get spousal amount or your own, whichever is more, if you were born after 1954.

I got in right before the bell... :beer

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by bobcat2 » Thu Oct 10, 2019 8:14 am

A key quote from the interview.
In terms of gender or marital status, we find that actually married couples (where both are working) and who tend to be richer overall than single people, actually are the least well prepared. And that's really for a couple of reasons (including) they no longer get the spouse’s benefit from Social Security (instead they get their own). We find that two-earner couples don't compensate for the fact that only one of them may be working and contributing to a 401(k). There's no doubling up for the fact that your spouse might not be contributing.
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Last edited by bobcat2 on Thu Oct 10, 2019 8:20 am, edited 1 time in total.
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by ObliviousInvestor » Thu Oct 10, 2019 8:15 am

montanagirl wrote:
Thu Oct 10, 2019 8:11 am
I thought that SSA did change it s that you get spousal amount or your own, whichever is more, if you were born after 1954.

I got in right before the bell... :beer
Yes, the rules did change -- and the changes did involve spousal benefits. (See this thread for a thorough discussion from the time, explaining exactly what did/didn't change.) But that is not what Munnell is talking about here.
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by ObliviousInvestor » Thu Oct 10, 2019 8:19 am

bobcat2 wrote:
Thu Oct 10, 2019 8:14 am
A key quote from the interview.
In terms of gender or marital status, we find that actually married couples (where both are working) and who tend to be richer overall than single people, actually are the least well prepared. And that's really for a couple of reasons (including) they no longer get the spouse’s benefit from Social Security (instead they get their own). We find that two-earner couples don't compensate for the fact that only one of them may be working and contributing to a 401(k). There's no doubling up for the fact that your spouse might not be contributing. And then to the extent that there's been previous divorces, that also undermines the financial security and retirement preparedness of these couples.
BobK
You've likely already seen this, Bob, but here is a piece of research that Munnell is likely referring to:
https://crr.bc.edu/briefs/do-individual ... -a-spouse/
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by bobcat2 » Thu Oct 10, 2019 8:22 am

ObliviousInvestor wrote:
Thu Oct 10, 2019 8:19 am
bobcat2 wrote:
Thu Oct 10, 2019 8:14 am
A key quote from the interview.
In terms of gender or marital status, we find that actually married couples (where both are working) and who tend to be richer overall than single people, actually are the least well prepared. And that's really for a couple of reasons (including) they no longer get the spouse’s benefit from Social Security (instead they get their own). We find that two-earner couples don't compensate for the fact that only one of them may be working and contributing to a 401(k). There's no doubling up for the fact that your spouse might not be contributing. And then to the extent that there's been previous divorces, that also undermines the financial security and retirement preparedness of these couples.
BobK
You've likely already seen this, Bob, but here is a piece of research that Munnell is likely referring to:
https://crr.bc.edu/briefs/do-individual ... -a-spouse/
I had seen it, but I had forgotten about it until I saw this thread. :wink:

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by AverageInvestor1982 » Thu Oct 10, 2019 8:31 am

I had never heard of this lady before, so I couldn't help but poke around.

As I understand it, a married couple with a single breadwinner has a fictional (for the sake of round numbers) income of 1000. They contribute 100 automatically to social security. When they start collecting SS, they don't just get 100, they get 150 due to the spousal benefit. Therefore in retirement they would get 150 against a pre-retirement income of 1000. (15%) This hasn't changed!

In a dual income household, both partners earn 1000 and each has 100 deducted from their pay checks. Upon retirement, they end up with 200 against a pre-retirement income of 2000. (10%) This also hasn't changed.

Scenario B provides a lower percentage of income replacement in retirement. It's always been this way. (Note - i'm not actually a great historian of SS so call me out if any of my assumptions are wrong).

What has changed: The demographic shift over the last 50-60 years: in 1960 only 25% of families had dual income, in 2012 it was up to 60% (Pew research). Which means that more families are or will receive a lower level percentage of income replacement from social security.

It's probably an important consideration to think about when advising people what percentage of their income they will need to save in order to maintain the lifestyle they have become accustomed to when retiring.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by Small Law Survivor » Thu Oct 10, 2019 8:41 am

JoeRetire wrote:
Thu Oct 10, 2019 8:07 am
Alicia Munnell was not wrong about spousal Social Security benefits. The OP just didn't understand the point she was trying to make. It's hard.
Yes, obviously I didn't understand her point. My bad, sorry. It was a podcast, and it went by quickly ....
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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by JoeRetire » Thu Oct 10, 2019 8:44 am

Small Law Survivor wrote:
Thu Oct 10, 2019 8:41 am
JoeRetire wrote:
Thu Oct 10, 2019 8:07 am
Alicia Munnell was not wrong about spousal Social Security benefits. The OP just didn't understand the point she was trying to make. It's hard.
Yes, obviously I didn't understand her point. My bad, sorry. It was a podcast, and it went by quickly ....
No need for sorry. Social Security is very, very complicated.

You mentioned that you were counting on the spousal benefit to kick in shortly.
Have you played with Mike Piper's excellent Social Security strategy calculator tool at https://opensocialsecurity.com/ ?

If not, you should - before you decide when to file for benefits.

You might also consider purchasing or borrowing a copy from the library of Mike's book "Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less"
https://smile.amazon.com/Social-Securit ... 099794658X

It's an easy read and has great information and recommendations for many situations.

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Re: Is Alicia Munnell Wrong About Spousal Social Security Benefits

Post by livesoft » Thu Oct 10, 2019 8:51 am

bobcat2 wrote:
Thu Oct 10, 2019 8:22 am
I had seen it, but I had forgotten about it until I saw this thread. :wink:
Or if both spouses have 401(k)/403(b)s, but one of their plans is craptacular, perhaps the one with the better 401(k) can defer more from their paycheck to compensate for the one with the worse 401(k) who might defer less.

This current thread might be an example of that: viewtopic.php?f=1&t=291854

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