America’s Social Security system has two major flaws. First, it is financially unsustainable: beginning in 2018, money flowing into the program will fall short of what is needed to pay promised benefits. Second, even if the financial imbalances did not exist, it is a poor investment for young workers. The best way to fix these problems is to incorporate personal retirement accounts into Social Security. For women in particular, reform is urgent.

  • Women at Work: Working women lose more than one in eight dollars to Social Security payroll taxes. A system of personal retirement accounts will help women make the most out of the money they earn. It will also ensure that married women who work receive the full value of their payroll taxes, which few do today.

  • Women at Home: Most women spend time in and out of the formal workforce. By allowing them to invest a portion of payroll taxes in real assets, like bonds and stocks, a system of personal retirement accounts will enable women to earn interest even when they take time off to care for their families.

  • Divorced Women: Currently, women whose marriages last less than ten years receive no Social Security benefits from their husband’s earnings. With personal retirement accounts, married couples will be equal partners in saving for retirement. Assets accrued during a marriage will be joint property and would be divided fairly in the event of divorce.

  • Retired Women: Because long-term investment yields higher returns than the existing pay-as-you-go system, women participating in a system of personal retirement accounts could expect higher incomes at retirement than Social Security pays. In addition, women would have greater control over their assets, and unused funds could be passed on to loved ones at death.

As Federal Reserve Chairman Alan Greenspan warned in recent congressional testimony, changes to Social Security are coming. Without personal accounts, the only alternative will be to raise payroll taxes and cut benefits. Such “reform” would be a lose-lose proposition for women who would face higher taxes, reduced employment opportunities, and lower retirement incomes. Women should demand reform based on the inclusion of personal accounts. We deserve a program that encourages savings, rewards work, and provides a secure, independent retirement.