October 23, 2007

VICKIE ELISA was ready to jump at the offer of a consulting position — and a $40,000 raise — in Washington six years ago. But a benefits expert whom she worked with at the DeKalb County Board of Health in Atlanta stopped her short. The new job had no pension plan, the expert pointed out, whereas Ms. Elisa would be eligible for one from the State of Georgia that would pay as much as 90 percent of her salary after she retired.

“I never ran the numbers that way,” said Ms. Elisa, now 49. “I always said, ‘I don’t need to think about this till I’m 60.’ ” 

Since turning down the consulting offer, Ms. Elisa has done a lot more thinking about retirement. Instead of retiring in three years at 52, she is planning to work until she is 57 or even 61, which would increase her pension by at least 21 percent. She is also planning to put future 401(k) contributions into more aggressive stocks.

More women are doing such retirement financial analysis, for good reason. They can’t afford to retire. Whether they have a traditional pension or a 401(k) plan, women consistently enter retirement with about half as much money as men do. 

The explanations have been known for years. Women generally earn only about 80 percent of what men earn. That hurts because the formula for a traditional pension is based on income, while the lower earnings make it harder for women to put money aside in a 401(k). 

Yet those skimpier 401(k)’s must stretch over a longer time frame, as women outlive men by about five years, on average. 

Moreover, women tend to work in service or part-time jobs that often do not provide retirement plans, and they are more likely to drop out temporarily to take care of children and sick parents, which cuts into their earnings and pension accumulation. When they do save, women gravitate toward conservative investments. Although that can be wise in volatile times, such a strategy usually means lower earnings over the long run.

Since these problems are well known, why have employers and their investment managers done so little to change things? Companies make some efforts to educate women on staff, but they contend that antidiscrimination laws constrain them. For their part, women’s advocates say they need to focus on the bigger issue of pay disparity. 

So the burden is falling largely on women themselves — to save more, to invest more aggressively and to postpone retirement. 

“What do women have to do now? That’s really the question,” said M. Cindy Hounsell, president of the Washington advocacy group Women’s Institute for a Secure Retirement, known as Wiser, and the expert who worked with Ms. Elisa. “Women are starting to talk, but I don’t think they realize the magnitude of the problem.” 

Just how much companies can — and should — do to single out women is debatable. They cannot give bigger pension allocations to women outright. A 1978 Supreme Court case, the City of Los Angeles Department of Water and Power v. Manhart, established that retirement plan formulas may not be based on sex. 

Short of that, there is general agreement that a company may offer booklets and seminars with titles like “Women and Retirement.” Experts say the sexes not only face different problems in investing but also do not even use the same language when they talk about finance. 

“Women tend to be much more focused on fear and being alone,” said Susan Hirshman, a managing director at JPMorgan Funds, the mutual fund arm of JPMorgan Chase. “For men, it’s more of a competition: ‘Did I get a 5 percent return?’ ” When she talks to audiences of women, Ms. Hirshman often uses a dieting analogy, comparing “too much of a certain type of stock” with “too many carbs.” Genworth Financial, an insurance firm in Richmond, Va., that was spun off from General Electric in 2004, distributes three financial-advice brochures clearly labeled for women and more than a dozen others aimed largely at them. 

“Women prefer to see information in terms of solutions and in a story-type form,” said Suly Salazar-Layton, who heads the company’s marketing efforts to women. The newest brochure, released last month, features true-life stories, including one about a wife with terminal cancer whose husband takes out a loan against her life insurance to grant her last wish, a European vacation. 

Vanguard Group, however, eliminated its brochure for women in 2004, after five years. Ellen Rinaldi, the principal in charge of Vanguard’s in-house investment research, said, “We determined that the needs of women in retirement are the same needs as anyone.” 

Some companies avoid the issue of sex-specific benefits by directing their benefits at job categories in which most of the staff happen to be women, said Virginia Olson, a principal at Towers Perrin, a consulting firm. 

But Pamela Hess, the director of retirement research at the Hewitt Associates consulting firm, is skeptical of such programs. “From a legal perspective, you can’t treat different parts of your population differently,” she said. 

Even with fancy new products, there is no avoiding the hard truth: if women want a decent retirement income, experts say, they will have to continue working until age 70 or 75, rather than the traditional 65. 

In a phone survey in May of about 1,300 mothers and working-age daughters, the MetLife Market Institute, a research arm of the Metropolitan Life Insurance Company, found that only 37 percent of the younger generation expected to retire before age 65, compared with 74 percent of their mothers who actually did.

But staying on the job may not be easy. “People say, ‘I’m going to work into my 70s,’ ” Ms. Hounsell of Wiser said. “But you can’t always do that physically.” Instead, more women are retiring into part-time jobs or retiring but returning as temps or consultants. Although part-timers or temps who work less than 1,000 hours a year will probably not build up more pension credits, at least they can avoid dipping into their savings. 

Women may be unpleasantly surprised to learn how big those nest eggs should be. The traditional advice is to plan to live on 75 to 80 percent of what you were making before retirement, but women must consider the extra expense of their likely longevity and the accompanying medical costs. 

Despite the huge disparities, most experts do not expect pensions to become legislative and legal battles, like pay equity and workplace discrimination. But Ms. Olson of Towers Perrin said that if pensions were tied in with other issues related to old age, including Social Security and health costs, people would pay attention. “There is the potential for a very large, looming issue,” she said.

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