Association for Public Policy Analysis & Management

Karen E. Smith (Urban Institute), Stephen Rose (Urban Institute), and Damir Cosic (Urban Institute)

This paper uses the Urban Institute’s Dynamic Simulation of Income Model (DYNASIM) to estimate the impact of legal same-sex marriage on retirement incomes of lesbians and gays from 2015 to 2065. It also estimates the impact of legal same-sex marriage on government budgets. Legal same-sex marriage reduces government budgets (increases the deficit) but also increases retirement incomes for seniors in the bottom three-fifths of the income distribution.

We find that legal same-sex marriage increases some components of net income while reducing others. Net per capita retirement income increases on average for lesbians and gays in the bottom three lifetime earnings quintiles, but falls for those in the top quintile and the change gets bigger over time. Marriage provides an important financial cushion for partners during periods of unemployment, ill health, and in retirement. Poverty rates among gays and lesbians ages 62 and older are projected to fall from 18 percent in 2015 to 5 percent in 2065 after same-sex marriage becomes legal. Legal same-sex marriage is one factor contributing to this reduction.

Legal same-sex marriage on net lowers aggregate government budgets (increases the deficit) in the long run, but because lesbians and gays are a small share of the US population, the aggregate effect of legal same-sex marriage is small (about $3.5 billion (less than 1 percent) lower in 2065). The number of Social Security beneficiaries and benefit outlays increase with expanded access to spouse and survivor benefits. More Social Security beneficiaries will pay taxes on Social Security benefits, contributing to an increase in federal income taxes. The number of Medicare Part B and D participants falls slightly as some same-sex partners gain employer sponsored health insurance through a working spouse. On net, the savings from Medicare and higher revenue from taxes do not offset the increase in Social Security spending.