Although times are changing, women are still less likely than men to join the work force. Women who do go to work are generally paid less than men, and they’re less likely to have a pension plan. They’re far more likely to leave employment for long stretches, to raise kids or to care for aging parents. And, as a rule, they live longer than men.
These facts have far-reaching consequences, because women are less likely to be able to accumulate savings while working, or while out of the work force. But because of their greater longevity, they’re more likely to need income for decades after their earning years draw to a close. And, in old age, they’re likely to end up alone, with few resources to draw upon.
That’s where Social Security is supposed to come in and ensure that elderly women have something to live on.
While 80 percent of men get benefits as retired workers, only 39.7 percent of women do. Most women-60.3 percent-get their benefits as a spouse or former spouse of a retired, disabled or deceased worker.
Despite the scary talk about Social Security’s future, the program’s trustees anticipate that revenues over the next 75 years will probably fall short of expenses by about 2 percent of taxable payrolls. Economists and politicians have suggested various ways to close that gap and keep the program solvent without slashing benefits.
But, President Bush is campaigning for a very different plan.
Rather than shore up the present program, the two proposals he has thus far embraced would shrink it by encouraging workers to divert some of their payroll contributions into private investment accounts, and by reducing benefits, compared to what’s promised under current law.
The key issue is how switching to a private investment account would affect women-and the answer is, it depends. If you work in a low-wage job or take time out to raise children, you’re unlikely to be able to build up much of a private retirement account.
When you retire, if you convert your retirement account into an annuity-an insurance policy that provides annual income in monthly payments-a small balance in the account would mean small payments. If the stock market is down when you retire, the account may be even lower than expected-further reducing the annuity.
Moreover, annuities are based on life expectancy-which works against women. If a man and a woman arrive at retirement with equal amounts in their private accounts, the woman will get a lower monthly payment-typically about 8 to 13 percent lower-because the insurer assumes she’ll live longer. On average, for an annuity purchased at age 65 with a $100,000 investment account, a man might get about $700 a month, a woman about $610.
As time goes on, the purchasing power of a woman’s annuity will also shrink. A typical annuity purchased at age 65 will lose at least 40 percent of its value by the time a woman reaches age 85.
Women will also be affected by another part of Bush’s plan-reduced benefits. By linking benefits to prices, instead of wages, the plan would cut benefits for everyone else-in other words, for about 70 percent of workers under 55.
That means that benefits payable to the surviving widows and children of such workers would be cut, too, because they’re based on the worker’s benefit. Thus, shrinking Social Security would have a domino effect.
There’s a strong case to be made that most women can’t afford to see their old-age security jeopardized by benefit cuts. Without Social Security, 53 percent of all women over 65 would be poor – compared with 12.4 percent now. Social Security provides 90 percent or more of total income for more than four in 10 single women over 65.
For minorities, there’s even more at stake. More than six in 10 single African American and Hispanic women receive 90 percent or more of their income from Social Security. And even with Social Security’s help, nearly half (44 percent) of African American and more than half (58 percent) of Hispanic elderly women living alone are poor.
Many experts agree that, based on key indicators, women’s reliance on Social Security will remain high over the next couple decades. Among the indicators are that work force participation rates remain lower for women in the 25-to-54 age range -75 percent versus 91 percent for men; women earn less than men – about 76 cents on the dollar; and the typical woman’s 401(k) balance is 40 percent lower than the typical man’s – $10,000 vs. $17,000.
Send questions/comments to the editors.
