Women are at a much higher risk than men of facing economic uncertainty in retirement and, on average, they'll enter retirement with considerably less savings than men. Women face these unique challenges because they spend fewer years in the workforce, earn less income, and have longer life spans than men, according to a report released today entitled, The Female Factor 2008: Why Women are at Greater Financial Risk in Retirement.
Multiple factors combine to cloud women's retirement security, including less time in the workforce and lower lifetime earnings then men. The report finds that women earn 77 cents for every dollar earned by men, which translates into a median retirement income of just 58 percent of men's. Additionally, due to family caregiving responsibilities, women are in the workforce an average of 12 years less than men. This translates into fewer years saving or participating in an employer-provided retirement plan. The median salary for a woman working full-time in 2006 was $32,515, compared to $42,261 for men. The disparity is even more dramatic for minority women, with African-American women's median income at $27,535 and Hispanic women's median income at $22,285.
Women also live, on average, five years longer than men and are far more likely than men to be widowed and living some part of their retirement years alone. Older women living alone - whether widowed, divorced or never married - face much higher rates of poverty than men do. Approximately one in five unmarried elderly women is poor.
"With more years out of the workforce to care for family, combined with lower wages and a greater life expectancy, it's clear that simply being a woman in our society may jeopardize your financial security," said Cindy Hounsell, President of Women's Institute for a Secure Retirement (WISER) and author of the study.
Hounsell joined Representatives Stephanie Tubbs-Jones (D-OH) and Phil English (R-PA), as well as Senators Kent Conrad (D-ND) and Gordon Smith (R-OR) and women from around the country today in calling for public action to mitigate the real risk of poverty that American women face in retirement.
"The legislation my colleagues and I have introduced, The Retirement Security for Life Act, will help Americans secure a steady stream of retirement income. This will be especially helpful for women without access to traditional retirement plans, who, as this report shows, are at greater risk of having a financially insecure retirement," said Representative Tubbs-Jones.
"As this report shows, all too often women are reaching retirement age without adequate savings. It's time we recognize these challenges and put public policies in place that help women take control of their financial futures," said Senator Conrad.
The report finds that lifetime annuities are an important tool that women can use to plan for a more secure retirement. Life annuities relieve the risks and burdens of managing a nest egg and can maximize savings' value over the course of an individual's retirement years. Life annuities are the only vehicle besides pensions and Social Security that provide a steady stream of income for life - a "paycheck for life."
To encourage Americans to secure a steady stream of income in retirement, Senators Conrad and Smith in the Senate and Representatives Tubbs-Jones and English in the House are the main congressional sponsors of The Retirement Security for Life Act (H.R. 2005, S. 1010). This legislation would provide a 50 percent tax exclusion on the income from the payout of a lifetime annuity, up to $20,000 per year. For an average American taxpayer in the 25 percent tax bracket, this would result in $5,000 of tax savings. The legislation enjoys broad bipartisan support with 66 co-sponsors in the House and 10 in the Senate.
"With more than one out of every 10 women retirees living in poverty, it is important for the federal government to help women save for retirement." said Senator Smith. "As this report demonstrates, simply being a woman can put a person at greater financial risk in their golden years. We must implement solutions such the Retirement Security for Life Act, to help women plan and save for the future."
"While Congress has acted to encourage retirement savings through many other vehicles, it is equally important that Congress focus on the disbursement side of retirement security," said Representative English (R-PA), a senior member on the House Ways and Means Committee, which has jurisdiction over tax policy. "By having a steady stream of income through a lifetime annuity, individuals can remove the uncertainty of knowing if their savings will be there throughout their retirement years."
Other findings of the report include:
More than 1 out of 10 female retirees and 1 out of 5 single women over age 65 live on less than $10,000/yr.
A typical 25-year-old woman with a college degree will make $523,000 less in wages over her lifetime than a typical college-educated man.
The average social security benefit for women is $800 per month, compared to $1,177 for men.
Of the 22 percent of women over age 65 who received income from an employer-sponsored retirement plan in 2004, the median annual benefit was $4,488 - less than half of the median annual benefit for the 29 percent of men over age 65 who received this income.