NCPA - National Center for Policy Analysis

Benefits of Personal Retirement Accounts for Women

August 15, 2001

Women are more dependent on Social Security than men for the simple reason that they live longer. Yet today's women face different challenges than women did when Social Security was started in the 1930s. For example,

  • Social Security provides retirement benefits only to those who have contributed for 10 years, and eligibility requirements for disability benefits are even stricter.
  • Many women don't meet those criteria because they don't work in "covered jobs" -- some state and local government employees are excluded, as are many teachers and some uniformed employees.
  • Others leave the workforce to raise children.

Social Security penalizes many of today's families. For example,

  • Lower-income, two-worker households often do less well under Social Security than more affluent households where one partner can stay home.
  • Single working mothers or households with nonmarried partners do not benefit from spousal benefits.
  • Women are eligible for spousal benefits only if they stay married for at least 10 years; however, marriages that end in divorce have a median length of seven years.

On the other hand, personal retirement accounts could affect women positively. For instance:

  • Proposals to evenly split personal account contributions between husband and wife could ensure that divorced women aren't denied retirement income.
  • Individual accounts would give access to capital markets that many women previously lacked.
  • Individual accounts could be bequeathed if a husband died.
  • Individual accounts could be structured to provide guaranteed inflation protection and insurance against outliving one's assets.

Finally, women who leave the labor force for education, homemaking, child rearing or other reasons would see their individual account balances grow even when they weren't working, unlike current rules that reduce benefits for nonworking years.

Source: Gwen King and Olivia Mitchell (both members of the President's Commission to Strengthen Social Security), "Reform plans to aid women," Dallas Morning News, August 14, 2001.


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