Helping Women Get More Out of Social Security
By Kelly Greene, The Wall Street Journal
Elderly women rely more heavily on
Social Security than men, in spite of the fact that
what they get is significantly less.
A hearing yesterday by the U.S. Senate Special
Committee on Aging offered some ideas for helping the
country squeeze more value out of those benefits.
In 2010, for example, 16% of women age 65 and over had
no income other than Social Security, compared with
12% of men. Divorce and widowhood played a large role
in women’s dire retirement-income situation: Their
household income fell by 41% after a divorce, almost
twice what men experienced. In widowhood, women’s
household income fell by 37%, while men’s fell by 22%,
according to a report released yesterday by the U.S.
Government Accountability Office.
Kelly O’Donnell, a vice president at Financial
Engines, which provides advice and asset management to
workers with 401(k) accounts, says that among the
401(k) plans with which it works, the median account
balance for men age 60 and older is $82,000 – but only
$46,000 for women in that age group.
For many people, “the best use of retirement accounts
is as a bridge to fund retirement in the early years,
allowing the deferral of Social Security benefits for
as long as possible,” O’Donnell said in her written
testimony. “I believe the challenges in getting
someone to defer Social Security can be overcome if
they are provided with a plan on how to optimize
Social Security and with how to use their 401(k) or
IRA as a bridge.”
Joan Entmacher, the National Women’s Law Center’s vice
president for family economic security, suggested a
number of fixes in her written testimony:
- Credit caregiving in the Social Security benefit
formula, since many workers, especially women, take
time off to care for children and elderly parents.
Entmacher suggests providing up to five years of
credit for such caregiving, and crediting the worker
with earnings of up to half of the average wage for
Improve benefits for widowed
spouses, since household Social Security payments
drop at widowhood by 33% to 50%. Entmacher
suggests providing an alternative benefit equal to
75% of the spouses’ combined worker benefits,
capping it so it’s targeted to low- and
moderate-income couples and improving benefits for
Use a different index to
calculate the annual cost-of-living adjustment.
Rather than using the current Consumer Price
Index, which she says “underestimates teh effect
of inflation on the elderly,” Entmacher recommends
using the Consumer Price Index for the Elderly,
which estimates the rate of inflation about 0.2 to
0.3 percentage point higher, because it gives
greater weight to health-care spending.