Social Security was established in 1935, when women’s financial security was completely dependent upon men. Most women did not work, did not stay single and did not get divorced. In 2005, the entire landscape has changed, but remarkably, the Social Security system has not. President Bush is proposing changes to the system that would give today’s women workers more control and more choices over their retirement.
So it might seem surprising that the National Organization for Women, whose entire mission is to further equality for women, is speaking out against President Bush’s plan to modernize the 40-year-old system, giving all workers, including women, an opportunity to control the future of their retirement.
In fact, NOW President Kim Gandy said in a statement: “Here’s the bottom line: If you’re a woman, you’re being asked to take your money out of a system that offers guaranteed retirement, disability and survivor benefits, and move it into a privatized system that will discriminate against you in the amount it pays out because you are female. Women weren’t born Democrat, Republican or yesterday.”
Putting aside the fact that Social Security will be bankrupt by the time today’s workers retire and therefore, benefits are far from guaranteed, here’s the real bottom line: The money working women or any other workers pay into Social Security is not being saved for their retirement. Today’s workers are paying taxes for today’s retirees. And it’s this pay-as-you go system that makes Social Security a bad deal for working women.
President Bush’s plan would solve that problem by allowing workers to invest a portion of their payroll taxes in low risk, diversified funds, which would grow over time. Lower wage earners (typically women and minorities) would be allowed to invest more than higher wage earners. Unlike Social Security today, the money in these accounts would be the property of the individual, so if you die before reaching 65 you can pass this nest egg on to your loved ones. One of the problems with the current Social Security system is that it favors single-earning couples, which was the norm in 1935. But the majority of women work today and deserve to have a Social Security system that recognizes their contributions.
Under the current system, the more a woman works doesn’t mean the more benefits she’ll receive. Women still spend more time out of the workforce than men and therefore have lower lifetime earnings than men. As part of the “dual entitlement” rule, many women will receive half of their husbands’ larger Social Security benefit rather than their own, even though they have paid for Social Security benefits with every paycheck. In other words, a working woman is no different than a woman who has never worked, since she is still financially dependent on her husband’s Social Security check.
But with a system of personal retirement accounts, women of dual-earning couples would be rewarded for their time in the workplace. With each paycheck they earn, more money would go into their personal retirement account. Even when a woman takes time out of the work force to care for children, she would continue to earn retirement savings since her money would be invested and continue to grow.
Personal retirement accounts also have important benefits for women who divorce or are widowed. Under the current system, if a woman gets divorced before 10 years of marriage, she is not eligible to receive her husbands’ benefits. But the money accumulated in personal retirement accounts between married couples would be split evenly if they were to divorce. If a woman’s husband dies and she has no children under age 18, she cannot receive survivor benefits until she turns 60, but if her husband had a personal retirement account she wouldn’t have to wait. She would receive those earnings as part of his inheritance.
These are just a few of the ways that personal retirement accounts would put women on more of an equal playing field with men, which is what women’s equality is all about. NOW’s Gandy and I agree that women were not born Democrat, Republican or yesterday, but that’s exactly why we should all be rallying behind the president’s plan for personal retirement accounts.