Senate Committee Holds Women’s Retirement Hearing* 

On July 25, the Senate Special Committee on Aging held a hearing, “Enhancing Women’s Retirement Security.” The hearing addressed suggestions for improving Social Security benefits for women.

Chair Herb Kohl (D-WI) opened the hearing with an explanation of the unique challenges facing women:

“In 2010, women over 65 were nearly twice as likely to live in poverty as men. The reasons for this are many: on average, women live longer than men. They make less money than men. And they are more likely to move in and out of the workforce to care for family members, which reduces their opportunities to contribute to a pension plan or Social Security.”

He continued by arguing for an enhanced special minimum benefit, a higher benefit for low-earning workers, which could be “done at a reasonable cost, and it would help ensure that career low-wage workers, who have little opportunity to save on their own, can avoid being stuck in poverty throughout their retirements.” He concluded by further identifying the root of the issue, saying, “SSA [Social Security Administration] has a responsibility to educate people about their benefits, and it needs to make sure people understand just how much money they are losing when they take their benefits sooner rather than later.”

Ranking Member Bob Corker (R-TN) echoed Sen. Kohl’s support for reform of the special minimum benefit, saying, “I think there is bipartisan support for something like that. And I appreciate you bringing it up. I hope as part of any fiscal reform package that we deal with over the course of the next six months, year and a half — I hope it's on the front end of that. I do think Social Security reform should be a part of that, and hopefully will be part of that, and my sense is the special minimum benefit that you're talking about very much should be a part of that also.” He also advocated for increasing awareness about delaying benefits: “One of the most responsible things that we could do here is … actually to do those things to make Social Security solvent for the long haul. But I think making people aware of the options that exist and certainly the ones you pointed out about deferral until a later age.”

LaTina Burse Green, assistant deputy commissioner for Retirement and Disability Policy at the Social Security Administration, explained the importance of Social Security for women:

“Although the Social Security program is gender neutral — individuals with identical earnings receive the same benefits — some elements of the program are particularly helpful for women for several reasons. First, women tend to live longer; second, women generally have lower lifetime earnings than men; and third, women often retire with smaller pensions and other assets than men.”

She went on to describe the specific impact of the spousal benefits: “In addition to potential eligibility for benefits as a retired or disabled worker, women may be eligible for benefits as a spouse, divorced spouse, or widow. These benefits are especially important to women because they are more likely to receive spouse’s or widow’s benefits due to their lower lifetime earnings, and many times women are eligible for spouse’s or widow’s benefits in addition to benefits they receive based on their own earnings. In other words, women may be entitled to benefits based not only on their own work and earnings, but on the work and earnings of a spouse.”

She also explained the importance for women of choosing when to start claiming benefits, saying that if a woman “chooses to start receiving benefits at age 62, her monthly benefit would be reduced to $750 to account for the longer period of time she will receive benefits. In general, the decision to receive benefits before the full retirement age permanently reduces her monthly benefit. If she chooses to wait to receive benefits until age 70, she would permanently increase her monthly benefit amount to $1,320.”

Illustration from Wikipedia

Director of Education, Workforce and Income Security Issues at the Government Accountability Office (GAO) Barbara Bovbjerg provided a summary of the problem and possible solutions:

“[R]etirement security continues to be a national dilemma for both women and men. Recent economic volatility, coupled with the continued shift toward defined contribution plans, exposes all workers to more financial risk than in previous generations. Our work highlights, however, that women face a unique set of circumstances that warrant special attention. Women may have a more difficult time saving for retirement and avoiding poverty late in life, partly due to the fact that they have a greater likelihood of being single, living longer, taking time out of the workforce to care for family members, and having lower average earnings when they are in the workforce. Further, our findings show that for recent generations of older women, late-in-life events, such as widowhood and divorce, can have devastating effects on women’s income and asset levels. According to the experts we consulted, many options exist for addressing the challenges women face, ranging from changes to Social Security to altering the pension system.”

Kelly O’Donnell, vice president of Financial Engines, offered statistics to illustrate the discrepancy between men’s and women’s retirement funds, stating that “the median 401(k) account balance for men age 60 and older is $82,000 and only $46,000 for women age 60 and older. Clearly more needs to be done to help women. For those with low account balances, solutions that merely annuitize retirement accounts will not be sufficient.”

She continued with an argument for women to delay claiming Social Security benefits, saying they “uniquely benefit from good Social Security decisions. For unmarried individuals, the benefit from Social Security deferral depends on life expectancy. Since life expectancy for women is substantially greater than for men, women have the opportunity to get substantial benefits from deferral … Women stand the most to gain by better Social Security decisions and help with maximizing their retirement accounts.”

Sabrina Schaeffer, executive director of the Independent Women’s Forum, offered a different approach to the issue by advocating for a total reform of the Social Security program, stating,

“The reality is Social Security is inherently unfair, produces a low rate of return on investment, does little to close the wealth gap, and ignores the very real problem of ownership and control. Women are a particularly disadvantaged group as a result of the program’s antiquated defined benefit system. The fact is Social Security’s benefit structure has remained largely unchanged since it was established in 1935; the same, of course, cannot be said for women’s roles in society … There are many ways to reduce Social Security’s costs … Social Security’s age of eligibility could be gradually raised and indexed to life expectancy to help bring costs down and return the system to its original intentions.

There are also numerous proposals to change how cost of living increases are calculated. Many estimate that current beneficiaries who earned the same Social Security payments get more today in real dollars than beneficiaries in years past, because of the method used for determining inflation. Congress should consider more accurate ways to estimate inflation so that benefits are stable, and not artificially inflated.

Congress should also consider explicit reductions in benefits that are paid out to high-income retirees. Social Security isn’t meant to be a welfare program, and the benefits that are received are supposed to bear a relationship to taxes paid in during one’s working life. Yet given Social Security’s bleak prospects, changes have to be made, and those seniors with the highest incomes will be better able to withstand reduced benefit payments. It may not be fair, but it may be necessary.” She concluded, “In the end, women want what we all want today; the freedom to save and invest in a way that reflects the needs of our family and plans for the future.”

Joan Entmacher, vice president and director of Family Economic Security at the National Women’s Law Center, countered Ms. Schaeffer’s suggestion to limit the Social Security program, and instead strongly advocated for an expansion of program, saying:

“Before I describe proposals for strengthening Social Security to increase retirement security for women, I would emphasize, ‘First, do no harm.’ Cuts to Social Security benefits that have been proposed as part of some deficit reduction plans would increase poverty and hardship for many older women.”

She explained the specific issues facing women, stating that under the current program, “those who took time out of the labor force, worked part-time, or accepted lower pay in exchange for the flexibility to meet caregiving responsibilities can see significantly lower benefits.” Ms. Entmacher provided suggestions for reform, including improving the special minimum benefit; providing Social Security credit for caregiving; increasing benefits for widowed spouses; improving the cost-of-living adjustment system to “reflect the spending patterns of older Americans, who spend twice as large a share of their budgets on health care, where costs are rising much more rapidly than for other goods and services”; and modernizing and restructuring Supplemental Security Income, a “means-tested program intended to provide a basic income floor for society’s most economically vulnerable citizens — the elderly poor and poor adults and children with disabilities.”

She ended with a plea for reform, stating that “[s]trengthening Social Security for women will require ensuring payment of promised benefits as well as improving benefits. It is possible to do both – if Congress has the will to do it.”