WASHINGTON, DC — “As a society, we purport to care about families. If so, we must change our retirement system so that married women who work don’t get the short end of the stick.” So said Nancy M. Pfotenhauer, president of the Independent Women’s Forum (IWF), as she testified before the House Ways and Means Subcommittee on Social Security today.

Women face “unintentional, but significant, systematic under-compensation inherent in the current system,” Pfotenhauer said, pointing out several inequities. She urged Congress to replace the current Social Security system with a funded system of individual, defined contribution accounts as the best way to both avoid an imminent financial crisis and create a system that is fair to every American.

First of all, Pfotenhauer pointed out, “women who try to balance the twin stresses of work and home by taking some time out of the workforce to care for young children or an aging parent suffer because this “time out” lowers their overall earnings upon which benefits are calculated.”

“And if a woman outlives her husband as she is likely to do” her overall household benefit will fall dramatically, despite the fact that her overall expenses do not.

Widowed women though, bear the brunt of Social Security’s inadvertent discrimination, Pfotenhauer said. The dual entitlement rule which prohibits a married woman from qualifying for both a spousal benefit and an individual benefit — is particularly harmful. “By its own estimates, the Social Security Administration reports that 24 percent of married and widowed women have their benefits slashed by the dual entitlement rule.”

Fairness can be restored and a financial crisis averted, Pfotenhauer told Congress, with the creation of a new, modern system with the following features:

  • Allow workers to divert the bulk of their payroll taxes (the World Bank advises at least 5 percent) to individual, defined contribution accounts.
  • The savings should be privately managed with prudential regulation but no government manipulation or direction of funds.
  • All money in personal accounts should be off-limits, with all returns re-invested, until retirement.
  • Upon retirement, at least a portion of the nest egg would be converted into an income stream.
  • Maintain a safety net to ensure that all workers receive at least as much income as the current system provides.
  • To maximize retirement income and ensure no bias against savings, the system should receive IRA treatment.

      The Independent Women’s Forum, founded in 1992, is a nonprofit, nonpartisan educational organization.