On February 28, Nancy M. Pfotenhauer, president of the Independent Women’s Forum, testified before the House Ways and Means Subcommittee on Social Security. The following is excerpted from her remarks.

As a society, because we purport to care about families, we must change our retirement system so married women who work do not receive the short end of the stick.

Women face unintentional, but significant, systematic under-compensation that is inherent in our current system. I urge 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.

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 bear the brunt of Social Security’s inadvertent discrimination. 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 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) into 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.