Retirement & Financial Planning Report

The percentage of a couple’s pre-retirement income that Social Security benefits replace has declined and will continue to decline, in part due to the way its spousal benefits operate at a time of increased participation in the workforce by women, a study has said.

The Center for Retirement Research report examined the “replacement rate” Social Security provides. It noted that wage earners under Social Security receive benefits based on a percentage formula and that the system also provides for a spousal benefit of half of that amount.


In the past, where it was more common for women not to have worked long enough to earn a Social Security benefit on their own work record, it was common for Social Security alone to replace more than half of the couple’s pre-retirement income, the study said. For example, if the wage earner’s Social Security benefit amounted to 40 percent of pre-retirement income and a spousal benefit provided another 20 percent, the total replacement rate was 60 percent.

The same was true, it added, in the more common situation in the past in which a woman worked long enough to qualify for a benefit on her own record, but due to length of work and income level, her own benefit fell below the value of the spousal benefit. In that case, the individual receives the higher of the two, but not both.

However, when both spouses of a couple had equal careers in terms of length and income level, each would receive, for example, 40 percent of their own pre-retirement income. That means that as a couple, the total replacement rate of pre-retirement income would be 40 percent.

It said that those born before the baby boom started in 1947 had higher replacement rates than the boomers – the oldest of whom already are eligible for full Social Security benefits – will have, at all income levels, and that the trend will continue as succeeding generations become eligible for Social Security.

Said the report, “From a household’s standpoint, the drop in replacement rates for couples will lead to a declining role for Social Security. As people are living longer but many are still retiring in their early 60s, this declining role for Social Security implies that retir¬ees will have to rely increasingly on other sources of retirement income.”