Jeffrey R. Lewis and
Cindy Hounsell
After a lifetime of hard work, Emily Hanson should have looked forward to a financially secure retirement. She was a productive member of society. When her children were young, she worked as a homemaker. Her husband died when the children were in high school. Emily went back to school and then found work with a prominent dental practice as a hygienist. However, as she approached retirement, Emily suddenly realized that Social Security - which she had assumed would sustain her in retirement - would barely provide a subsistence level of income.
Young people entering the workforce today hear a steady drumbeat of warnings, saying, "Save for retirement - Social Security won`t be enough!" Emily Hanson never got that message. Without adequate financial planning, she didn`t realize that Social Security was designed merely to supplement, not to become the mainstay of retirement income.
Women are in far greater danger than men of living out their retirement years in poverty. Poverty, unfortunately, has a distinctly feminine face. As the readers of RDH are already painfully aware, few dental practices offer retirement benefits. While hygienists earn a respectable living, it is often tough to put money away for retirement after paying the bills.
Millions of elderly American women - one in four - depend exclusively on Social Security to live on during their retirement years. Although the level of benefits varies, the program provides at best a scant subsistence living. And women, particularly minority women, often find their Social Security and other pension benefits are considerably smaller than those of their male counterparts.
The challenge is to educate those who have not yet retired and help them take the necessary steps toward a financially secure future. Such education can keep women from being excessively dependent on Social Security and help avoid the increasingly common phenomenon of elderly women facing poverty for the first time.
An unique risk
Why do so many women find themselves so dependent on Social Security? And why are those benefits smaller than those of their male counterparts? There are a host of reasons:
- Women receive lower retirement benefits.
- Women earn less than men and are often in fields like dental hygiene, which do not offer pensions or savings plans. When Social Security or private pension benefits are calculated, lower-paying jobs yield smaller pensions and reduced Social Security payments. Today, more than half of all women do not have their own pensions, and those who do receive about half of what men receive. Women receive an average pension of $4,800 annually as compared to $9,780 for men.
- Caregiving responsibilities fall disproportionately on women. Many working women leave the workforce for long spells to care for children or aging parents. During
these caregiving years, women are not contributing funds to Social Security. Consequently, their retirement benefits are lower.
- Women often leave their jobs without earning pensions. For those lucky few who are offered pension plans, most require employees to work for at least five years to qualify fully for benefits. On average, women stay with an employer for only 3.5 years, so they often forfeit some or all of their retirement benefits.
Minority women are at even greater risk
African-American and Spanish-speaking women are in even greater jeopardy of living in poverty during their so-called golden years. Why?
Minorities earn less on average than their white counterparts. Lower weekly or annual earnings mean reduced Social Security benefits upon retirement. While white females earn 76 cents for every dollar earned by a white male, African American women earn 67 cents and Spanish-speaking women earn only 59 cents for every dollar earned by a white male.
Minorities are more dependent on Social Security as their principal source of retirement income. This dependence on Social Security places African-American and Spanish-speaking women at greater risk of becoming impoverished in retirement.
While women face unique risks in retirement, they can take action to protect their financial futures. The following represents some initial steps women can take to get started in planning for retirement:
- Know where you stand. Estimate the value of your assets and income. Assets are things you own, such as your home, car, bank accounts, IRAs, lump-sum payments from pensions, 401(k)s, stocks, bonds, and mutual funds.
- Calculate your Social Security benefits. Since Social Security will represent at least a portion of most women`s retirement income, it is critical to establish what the anticipated benefits will be. You can get a free estimate of how much your Social Security benefits will be by calling the Social Security administration at (800) 772-1213.
- Pensions. Find out from your employer whether they offer a pension plan. If they don`t, ask why. (Sometimes it`s because no one has requested one!)
If there is a plan, find out whether you qualify to be included, as well as whether you have worked long enough to earn benefits. Also learn about any special provisions for early retirement, changing jobs or death.
If you or your husband has a plan, learn how much your pension will be. You can request a statement from your employer, or your husband or ex-husband`s employer, estimating the monthly pension benefit you are likely to receive.
Other Savings. Do you participate in a 401(k) or other company savings plan? If so, speak to your benefits manager to find out the value of your assets in that plan.
Calculate how much income all your savings and benefits will provide. Is the total enough to cover your expenses? If not, consider saving more and investing those assets appropriately. It is critical to become aware of other savings and investment options to ensure a comfortable retirement, especially in situations where no pension plan is offered.
Consider seeking the counsel of a reputable financial adviser to establish other avenues of savings and investments.
There are two types of financial advisers. Fee-only advisers charge a flat fee or an hourly fee for the financial advice they give. They do not receive commissions from mutual funds or other financial products they sell. Some commission-based planners also charge a fee. The financial services industry is not regulated, so try to find a licensed broker or a certified financial planner.
Consider Supplemental Insurance for Health Care. If you`re eligible for Social Security, you will qualify for Medicare, which provides basic coverage for your health needs starting at age 65. But many people purchase supplemental or "Medigap" insurance to help with costs not covered by Medicare. Some people also purchase disability insurance, long-term care insurance, or life insurance.
Vote! Vote for candidates who are attuned to the unique vulnerabilities of women in retirement and who will preserve, strengthen, and protect Social Security.
It is never too early - or too late - to take control of your financial future. By making the right moves now, you can look forward to a long and happy retirement, free of financial anxiety.
Jeff Lewis and Cindy Hounsell are with WISER, a non-profit organization designed to improve the long-term economic security of millions of American women and men. For more information, write WISER at 1201 Pennsylvania Avenue, N.W., Suite 619, Washington, D.C. 20004.
