Women as Retirees

Commentary by Pete du Pont

Americana was once thumbnail sketched as mom, baseball, apple pie and Chevrolet. And we might reasonably have imagined that the list unfolded in order of relative importance. But anyone keeping tabs these days will tell you exactly the opposite is true.

It turns out that many women -- and that obviously includes plenty of mothers - are not faring too well in their retirement years. The good news is that many are living longer. The bad news is that they are increasingly likely to be subsisting at or near poverty in their old age.

To help personify matters, consider the following. Women comprise almost three-quarters of the elderly poor. And 14 percent of all women past the age of 65 actually live below the poverty level. Among people past the age of 65, twice as many women as men live below the poverty level. Now imagine that one of those women was your mom.

These and other sobering statistics were presented at the Women In the Economy Conference held during the first week of March in Washington D.C. Along with retirement, the conference, which was sponsored by the NCPA, focused on a host of other women's issues that included taxes, welfare, Social Security and health care.

The problem, sadly, is systemic, for both working women and homemakers. Women who do join the workforce are often torn between earning an income and looking after the family. For this reason, they tend to change jobs fairly often, at least on average. This frequent job turnover has rough consequences for their retirement prospects. It precludes many women from becoming fully vested in company programs. When they do leave, they often cash out their retirement program, forgoing the ability to access pension benefits they will need later on.

The setup of Social Security illustrates another glaring inequity for women. Women are more likely to engage in unpaid labor as homemakers. But child rearing, arguably society's most indispensable service, earns women a big fat zero when it comes to Social Security retirement benefits. This is exacerbated by the fact that three-quarters of women over the age of 65 live alone.

Funds for the typical retirement, for both men and women, come from either an employer-sponsored plan or Social Security. In the case of the employer-sponsored accounts, there is no contest between men and women. A sampling of men and women aged 54 to 62 revealed the following disparity. Men coast into retirement with an average company retirement account balance of $123,625. Women, on average, limp into their declining years with just $25,557 in the till.

The prospects for women who will depend on Social Security are even bleaker. The overall median net worth of households approaching retirement is just $56,400. But among households in the bottom half of the income spectrum, Social Security benefits make up almost half of their net worth. Things are even worse at the lower end of the spectrum. Households with incomes between $10,000 and $25,000, Social Security represents two-thirds of their overall worth.

President Bush's tax package that passed in June of 2001 provided solutions for a number of issues vexing women who are struggling to save for their retirement. Among other things, the bill provided for faster vesting for employer matching contributions, it provided a catch-up provision for older women and it increased allowable benefit and contribution limits for employer pension and 401(k) and 403(b) plan contributions.

The president's plan is a good first step, but more needs to be done. For starters, the contribution limits on IRAs should be increased. Small business owners and economic sectors that employ large numbers of women should be given incentives to make retirement benefits a part of their compensation packages. Since the majority of women are not likely to cease putting their families first, provisions should be made to extend employment pension coverage to part-time workers.

There is an old saying that no good deed goes unpunished. Truer words were certainly never spoken about many women in retirement. Their reward for staying at home, driving the carpool, cooking, cleaning and always being there for you and me is a retirement bereft of security, and sometimes even of the basic necessities.

Another key component of Americana is fundamental fairness. With that thought in mind, we should pursue sensible policies that address the inequities of women's retirement. It is the right thing to do, and mom definitely would approve.