Women have made impressive gains in the workplace and are emerging as leaders in a growing number of professional fields. These gains, however, mask a much gloomier economic portrait for many older female employees. And the story is particularly dire for retired women struggling to avoid poverty as they age.
The reasons women generally face worse retirements than men are well-known. As recently cataloged in a report by the Government Accountability Office (GAO), they include:
• Women continue to have lower earnings than men. They are thus less able to make sufficient retirement-plan contributions.
• They take time away from their careers to have families. This reduces their income, thus driving down the size of their retirement nest eggs. It also reduces their lifetime earnings and ultimate Social Security benefits. Time off from work is also likely to delay and impede salary increases and affect career trajectories.
• They are the nation's primary caregivers, providing hundreds of billions of dollars in unpaid care each year. These "earnings," of course, have no beneficial impact on retirement incomes.
• Women outlive men, on average, by several years. This forces them to spread a smaller amount of assets over a longer number of retirement years.
As a result, the poverty rate among people age 65 and older is nearly twice as high for women as for men—9 percent versus 5 percent.
The GAO interviewed retirement experts and assembled a list of 22 suggestions—in Social Security, 401(k) plans, and private pensions—to help improve the economic future for older women. The proposals apply to retirees of both sexes but tend to favor women more.
"These options could help shield women from the effects of divorce, widowhood, and unemployment and decrease their risk of living in poverty," the agency said. However, it also noted that the provisions would cost money, and that any increased government spending or tax losses might require offsetting cuts to other programs.
Here are the experts' ideas:
1. Automatic individual retirement account. Employers who do not sponsor a pension plan would be required to automatically enroll employees in an IRA unless the employee opted out.
2. Expansion of the Saver's Credit. This existing tax credit for retirement savings for low- and middle-income workers could be expanded in a number of ways to encourage greater retirement savings.
3. Caregiver contributions to IRAs. Allow all caregivers to contribute to IRAs up to the qualified contribution limit, which would be based on the individual's adjusted gross income in the year prior to becoming a qualified caregiver.
4. Expand "catch-up" retirement plan contributions. Currently, workers age 50 and older are permitted to make additional, annual "catch-up" tax-deferred contributions of up to $5,500 to their defined-contribution plans. Younger workers could be included and contribution limits increased.
5. Credit unemployment insurance payments toward Social Security earnings. The United States does not allow workers to receive earnings credits for unemployment compensation. Some other countries allow this.
6. Create Social Security earnings credits for unpaid caregiving. Workers who take time out of the workforce to provide care—a group dominated by women—could have their Social Security benefits increased.
7. Ease employer retirement plan eligibility. Currently, employees are generally eligible for 401(k) plans once they have at least 1,000 hours of service during a 12-month period. Reducing this requirement would accelerate retirement contributions. It would particularly help part-time and short-term employees, a group dominated by women.
8. Shorten vesting periods for retirement plans. Current government rules require employees to be vested in no more than three or six years, depending on the type of plan. Reducing this period would encourage contributions and increase benefits for employees with shorter job tenures.
9. Expand spousal protection for retirement plan distributions. Currently, spousal consent is not required when married individuals take distributions from their IRAs or 401(k)s.
10. Provide public education on the impact of delaying Social Security benefits. Many people elect to begin Social Security benefits as soon as they turn 62, which is the earliest age for claiming them. Surveys show there is not broad public awareness that unclaimed Social Security benefits will increase by about 8 percent a year from age 62 to 70.
11. Raise retirement ages. By raising the ages for early retirement (now 62) and full retirement (now 66), employees may choose to work longer, resulting in additional payroll tax revenue and raising retirement incomes.
12. Extend jobless benefits for older people. Extending the eligibility period for unemployment compensation for older workers could reduce the financial pressures on them to claim Social Security benefits at younger ages.
13. Encourage the use of annuities in retirement plans. Wider use of annuities would boost retiree access to guaranteed income payments. Annuities may be especially attractive to women because of their longer life spans.
14. Change retirement-plan annual payout rules. Retirees now must begin taking minimum annual distributions from retirement plans when they turn 70½. Easing this rule would make it easier for retirees to purchase so-called longevity annuities, which typically don't begin making payments until the retiree is 85 years of age.
15. Ease divorcee access to Social Security benefits of former spouses. Currently, a divorced spouse can receive benefits based on a retired worker's earnings record if the marriage lasted at least 10 years, and the spouse is unmarried and at least 62 years old. Easing these rules would result in more benefits to divorcees, favoring women due to their longer life spans.
16. Increase the size of the Social Security COLA. The program's annual cost-of-living adjustment is now tied to changes in the consumer price index (CPI) for urban workers. Using a special CPI for older consumers would, according to historical comparisons of the two indexes, produce higher Social Security benefits that more accurately reflect the expenditures of older consumers.
17. Expand the Special Minimum Social Security benefit. Social Security includes this benefit to reduce poverty among retired lifetime low-wage workers. However, very few people are now eligible to receive it.
18. Create a special Social Security longevity benefit. Social Security recipients over age 80 or 85 could receive an additional benefit, such as an extra 5 percent on top of their regular benefit.
19. Raise Social Security survivor's benefits. Surviving spouses now receive the larger of their own benefit or half their deceased spouse's benefit. This provision can halve household income where both spouses had similar earnings records, while having no impact on a household where one spouse did not work. Changing the benefit to 75 percent of the couple's combined benefits would equalize treatment of different couples.
20. Increase Social Security's spousal benefits for divorced spouses. Divorced spouses who qualify now receive benefits of up to 50 percent of the worker's benefits. Experts estimate that raising this to 75 percent would reduce the poverty rate among divorced spouses from 30 percent to 11 percent.
21. Expand eligibility for Social Security benefits to disabled surviving spouses. These survivors are often at great financial risk when their spouses pass away.
22. Raise survivor payments for annuities. Currently, if a worker receives a joint and survivor annuity and later dies, the surviving spouse continues to receive the annuity, but at not less than 50 percent of the amount the worker received. This option would increase the minimum continuation percentage to 66 or 75 percent.