Saving and Investing: A Challenge for Women

Policy Backgrounders | Retirement | Work & Wages

No. 161
Thursday, April 15, 2004
by Celeste Colgan and John Goodman

What Can Be Done?

Our retirement system is in desperate need of reform. These reforms will affect both men and women. But some of the needed reforms have special relevance for women, because women often take different roles in our economy:

  • Accumulating retirement assets is more important to women than men because women live longer and are more likely to live alone during their retirement years.
  • Because women switch jobs more frequently, they are more adversely affected by vesting periods than men.
  • Because they are more likely to work part time, women are less likely to receive the benefits employers offer full time workers.
  • Because they are more likely to invest in IRAs than employer-based retirement savings, arbitrary contribution limits adversely affect women more than men.
  • Women are more likely than men to be adversely affected by a system that discourages employers from providing sound investment advice because they are more likely to need and take that advice.
  • Because more women than men work for low to moderate wages, they have less access to the tax advantages of the Roth IRA.

The details of reform are less important than the goals. In general, a well-functioning retirement system that meets the needs of men and women, married and single, should strive to:

  • Create retirement plans that are personal and portable, traveling with people as they move from job to job.
  • Eliminate rules that arbitrarily punish people who work part-time, switch jobs frequently, or move in and out of the labor market.
  • Eliminate arbitrary ceilings on retirement savings plan contributions that unfairly favor people in some industry sectors over others.
  • Establish procedures that encourage people to invest wisely and prudently over the course of a work life.
  • Establish a system for taxing retirement income that does not unfairly penalize people because of changes in their tax bracket over time.

"Details are less important than the goals of reform."

Some of the reforms contained in the Bush tax cut in 2001 are a step in the right direction. Much more needs to be done.


NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.

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