Carrie Lukas, IWF’s Policy Director, testified today before the House Ways and Means Subcommittee on Social Security. Lukas was invited to participate in this first in a series of public hearings on protecting and strengthening Social Security given her unique expertise in Social Security’s effects on women. In her testimony, she examined the need for reform and benefits of personal retirement accounts for women.

Statement of Carrie L. Lukas
Director of Policy, Independent Women’s Forum

Testimony Before the Subcommittee on Social Security of the House Committee on Ways and Means

Hearing on Protecting and Strengthening Social Security; The Evolution of the Social Security Safety Net and Its Importance to Vulnerable Populations

Mr. Chairman and distinguished Members of this Committee, I thank you for inviting me to appear before you today, to testify on an issue so critical to our country’s future. I am thrilled that this Committee is holding this hearing to consider Social Security’s effects on women.

My name is Carrie Lukas and I am the director of policy for the Independent Women’s Forum, a nonprofit organization dedicated to exploring how public policy can give women greater freedom, independence, and economic security. I first began studying Social Security’s looming financial problems and its impact on women in 1997, when I arrived in Washington at age 24. I realized that all women — from those in retirement to those just beginning their careers — have a great deal at stake in the Social Security reform debate.

But today, when I think about Social Security and its effects on women, I have one woman in particular in mind. In September, my husband and I will be blessed with the birth of our first child, and we just found out that we are having a baby girl.

When I think about the challenges facing Social Security and how Congress should be evaluating reform proposals, I believe it’s critical that we focus on creating a system that will serve the next generation.

I believe there will be universal agreement on this panel that as we reform Social Security, we need to make certain that the new system preserves Social Security’s promise and protects the most vulnerable members of society — most of whom are women. Clearly that requires protecting the benefits of current seniors and those approaching retirement. It also means that we should protect the benefits of low-income workers so that Social Security fulfills its promise of keeping seniors out of poverty.

But I believe that we also need to think seriously not just about how the system will affect those of us working today, but the workers of tomorrow. What kind of Social Security system do we want to endow to my daughter and her peers entering the world in 2005?

For those children, Social Security’s financial crisis is not something that can be shrugged off as occurring in a distant future — it will be a reality they face throughout their lives. Social Security will be running a deficit before my little girl finishes grade school. If nothing is done to address Social Security’s shortfall, by the time my daughter graduates from college, she will not only lose 12.4 percent of her income to payroll taxes, but a portion of her income taxes will also have to be used for Social Security. And well before my daughter reaches retirement, Social Security will be unable to meet its present obligations and her retirement benefits will be slashed.

We must do better for our children. So today I will discuss some of the problems with the current system — in particular its disparate affect on women — and how incorporating personal retirement accounts into Social Security can address existing inequities, move us closer to solvency, and create a better, fairer system for future generations of women.

Problems in the Current System for Women

Social Security was designed at a time when few women were working outside of the home. It was designed to meet the needs of traditional families — a working husband and a full-time homemaker.

Great changes have taken place during the seventy years since Social Security’s creation. Today, most women are working outside of the home. Many women — with or without children — never marry, and divorce has become more prevalent among those who do, putting many women at risk of economic hardship. Unfortunately, Social Security’s structure hasn’t been updated to reflect the changing times.

Today, women take on many roles. We are homemakers; we are workers; we are the caretakers of elderly family members; we are spouses; we are single earners; and sadly, we are also widows. Women will take on many of these roles during their lives, and often must make difficult choices about what’s best for themselves and their families. It is an important principle in public policy that individuals should be free to make these personal decisions without government interference. Unfortunately, under the current system, Social Security penalizes some women for their choices while rewarding others. When considering reforms to Social Security, it should be a goal to treat all women equally.

Under the current system, women either receive benefits based on their own work history or as a result of their husbands’ work history. A woman who never joins the formal workforce and pays no Social Security taxes will receive benefits worth 50 percent of her husband’s monthly benefit at retirement. A married woman who works will receive the higher of either half of her husband’s benefits or a payment based on her own work history. That means that many married women who join the workforce receive no additional benefit for the taxes they pay into the system.

This is unfair to working women and distorts the decision of whether to enter the workforce in the first place. A married woman already faces high marginal tax rates because her income is combined with her husband’s for tax purposes. If she expects to receive no additional retirement benefits from the taxes deducted from her paycheck, then she may be further discouraged from taking a job.

Social Security also includes some very serious drawbacks for the stay-at-home mom. Consider the situation of a stay-at-home mom who ends up divorced. This woman agreed to forgo earning her own income in order to raise children while her husband worked. But if she gets divorced after having been married for less than 10 years, that woman has no right to any portion of the retirement benefits that her husband accrued while they were married. This means that many divorced women are forced to start from square one when saving for retirement.

Many single women also face problems under Social Security. Consider a 60-year old single-mom who has been working all of her life to raise her children. In addition to struggling to provide for her family’s needs, she has been paying taxes to Social Security. If she dies at age 60 and her children are over age eighteen, according to Social Security’s rules, her family will receive a paltry $255 death benefit. Her years of work and thousands dollars in taxes paid will have been for nothing. This example is not an aberration: U.S. Census Bureau data shows that, each year, tens of thousands of single women between the ages of 24 and 64 die.

All of these inequities are the result of Social Security’s lack of ownership. None of the money paid into the system by these women and their family members is saved for their retirement. This needs to be changed.

Future Funding Shortfall

The final problem I would like to highlight is that the current system is not only unfunded, it is unsustainable.

Opponents of reform correctly emphasize that women are more dependent on Social Security than are men. However, because they offer no real solutions to the funding problems ahead, they leave women at an even a greater risk of poverty than today. In fact, a Social Security Administration study showed that if nothing is done to fix looming problems, the poverty rate of our elderly will double! Doing nothing simply is not an option.

The reasons are obvious: If nothing is done to address Social Security’s financial problems, it will begin running a deficit in just over ten years. At that time, Social Security will require significant infusions of additional revenue, which means that the government will either have to raise taxes or cut spending on other programs. By the time that I am getting ready to retire in 2040, Social Security will only have enough money coming in to pay about three-quarters of the benefits that I have been promised. That means that either my benefits will have to be slashed or my daughter — who will likely be working to raise a daughter of her own by that time — will face a skyrocketing tax burden.

I urge Congress to act now to put Social Security on firm financial footing, so that men and women have time to prepare for the changes that must take place. In reforming Social Security, Congress should address the inequities in the existing benefit structure so that it treats women, regardless of the roles they take on during their lives, more fairly.

The Benefits of Personal Retirement Accounts

Incorporating a system of personal retirement accounts into Social Security is the key ingredient for achieving all of these goals — for making the system more financially sound and addressing the inequities in the current system for women.

Personal accounts would put women on more equal footing. Those women who choose to work would be putting more away for retirement. Those who choose to stay at home would still be earning interest on the money they previously invested, and a woman would know that if and when she chooses to return to the workforce, she won’t just be throwing her payroll taxes away.

Personal accounts would be an individual’s private property. Therefore, in the event of divorce, the personal account could be divided equally between the husband and wife during settlement, just like all other assets. Personal accounts also would be inheritable. That single mother who has been paying payroll taxes all her life would know that if she dies before reaching retirement, her adult children will receive the benefit of her lifetime of labor. They could use that money to go to college or to start a business.

Personal accounts would also give women the opportunity to earn a higher rate of return on their income, which is particularly important since women are less likely than men to have jobs that provide retirement savings options, such as corporate pensions or 401(k)s.

Opponents of personal retirement accounts often dismiss the importance of achieving higher rates of return and emphasize the “risk” associated with investing in the market. But none of these opponents — and I would assume no one in this room — actually believes that people should avoid investing in a sound mix of assets, including stocks and bonds.

So if there is general agreement that saving and investing is an important part of retirement planning, then the real debate is simply whether individuals should have the choice to use some of this money — their payroll taxes — to fund personal retirement accounts. Those who don’t want people to use payroll taxes want individuals to come up with other money and invest that for retirement.

Women tend to be the household money managers; we know just how difficult it can be to make ends meet. This is particularly true for lower income women. They are paying for housing and food. They are paying for healthcare. And, they may be trying to put money away for a child’s future college education. After paying taxes, it’s nearly impossible for these women to scrape up extra money that can go into a retirement fund.

That’s why using current payroll taxes to fund personal retirement accounts is so important. Workers already lose nearly 1 in every 8 dollars they earn to Social Security. Why should we tell that cash-strapped working mom to cut something else out of her budget so that she can put more away for retirement? It’s time to let her make the most of the money that is already supposed to be dedicated to her retirement — her payroll taxes.

Preserving Social Security’s Promise for Vulnerable Americans

Incorporating a system of personal retirement accounts into Social Security would not require eliminating guaranteed benefits from the system. In fact, reform proposals being discussed would strengthen the safety net compared to current law by ensuring that lower-income Americans will not have their benefits cut in the future.

Under the President’s proposal to use progressive indexing to reduce Social Security’s unfunded liability, low-income Americans would be protected from the benefit cuts scheduled under current law. It would ensure that all Americans would receive benefits equal to or greater than the benefits received by today’s seniors, even after adjusting for inflation. However, this proposal would recognize that the government cannot pay all of the benefits that have been promised and would make gradual adjustments to reduce Social Security’s liabilities in a manner that is equitable and gives individuals time to adjust their retirement savings plans accordingly.


In our society, a woman has the right to choose where to live, whom to marry, whether or not to have children, and how to protect herself and her family from very real threats that exist in our country today. Women also should be able to decide for ourselves whether we want to keep putting all of our money into Social Security, or keep a portion of it in an account that we own and can watch grow.

I believe American women deserve greater control over their retirement dollars and more choice when it comes to Social Security. The combination of personal retirement accounts and progressive indexing will create a better, stronger, and fairer Social Security system for women. Among the many benefits of this proposal is that it will:

  • Protect the benefits of current retirees;
  • Improve the safety net for low-income Americans, who are disproportionately women, compared to current law;
  • Make the system more equitable in its treatment of women; and,
  • Create inheritable assets for all Americans who choose personal accounts.

Finally, these reforms are critical to easing the burden on future generations. This is something too often overlooked when we talk about Social Security and women. Most women’s top priority is making sure that our children have more opportunities than we do. Social Security should be no exception. We cannot simply push tough choices down the road and leave our children with a mountain of debt and a crushing tax burden. We should act now to create a funded, fairer Social Security system and a brighter future for the next generation.