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Retirement Income: Women at Risk

Ravelle Brickman, 74, always assumed that retirement would somehow work itself out.

She raised two children as a single mother in the 1960s and '70s while working in the public relations industry in New York City — but never at a very high-paying job. She never saved anything for retirement, and even though two employers offered pensions, she chose to take her benefits as a lump sum when she left those jobs, rather than wait for the lifetime monthly payments that would have started at retirement age.

“I spent whatever I earned, despite some very good advice from lawyers, accountants and my father,” she recalls. “I somehow never put money away, and I spent what I made. If I had a good year I took a vacation or took the kids on some wonderful trip.”

Later in life, Brickman ran her own PR firm and then was a self-employed teacher and freelance writer; she waited until age 65 to file for Social Security to avoid penalties for early filing and continued part-time work. But she had no savings, a mortgage and a heap of credit card debt.

Something did “work out” for her shortly after that, when she inherited $250,000 from an uncle — money she used to retire her debt and to buy an income annuity. Now in her early 70s, Brickman receives $2,300 a month from Social Security and the annuity, plus some income she earns writing and teaching.

It’s enough to get by in many parts of the country, but doesn’t meet the $4,000 per month she needs to live in Manhattan, even without the mortgage. “I could be the poster girl for the fact that women — even smart ones — are very bad financial planners,” she says.

National Problem

Unfortunately, Brickman’s brush with retirement disaster is all too common among American women — and the recession is worsening the outlook. Women earn less over the course of their lifetimes than men, which reduces their contributions to Social Security and funds available for retirement savings. Motherhood often interrupts careers. And women tend to be more conservative investors than men, which often means their portfolios don’t grow as quickly when they are young — a time when they should be investing aggressively.

Even for middle-class or affluent women, the risks are high.

According to the Social Security Administration, in 2008 17 percent of unmarried women age 65 or older had income below the official poverty threshold of $10,326; 28 percent were considered near-poor, with income below $12,907.

The yawning gap in retirement security widened during the recession. A survey of nearly 3,600 American workers conducted for the Transamerica Center for Retirement Studies by Harris Interactive shows:

  • Women are losing confidence that they’ll be able to retire comfortably; just 6 percent said they were “very confident,” compared with 9 percent in 2007, before the recession began. (Ten percent of men were “very confident, compared with 16 percent two years earlier.) And only 33 percent of women said they were building an adequate nest egg, down from 41 percent.
  • Although a slightly higher number of women had access to a workplace retirement plan in 2009 (68 percent) than two years ago, the percentage actually participating fell to 70 percent — down from 78 percent in 2007. And they participated at a far lower rate than did men (82 percent).

Why Women Are at Risk

1. Women earn about a third less than men during their working lives. That means women are generating smaller contributions to Social Security and pensions, and they have less free cash available to sock away in 401(k) accounts.

2. Caregiving interruptions. Many women leave jobs — or retire early — to take care of children or aging parents, and that interrupts the income that generates contributions to Social Security and pension accounts. These disruptions can be especially damaging financially because they are so often unplanned. Janice Johnson had just left her job in New York as a managing director of American Express’ tax and business services division in 2003 at age 49 to start her own executive training business, when her mother — who lived in Mississippi — became seriously ill. Taking care of mom became her full-time job for the next two years.

“While I was caregiving, I went through my savings and ran up a fair amount of credit card debt when interest rates were low and credit lines were high — an option that wouldn’t be available to me in the same way today,” says Johnson. Today, at age 56, she’s back on track, running her own financial consulting business. While she had never saved much for retirement, she expects to support herself through a real estate investment she intends to sell, along with an expected inheritance from her mother.

3. Fewer women have pensions. Among today’s seniors, only 29 percent of women received income from a retirement plan or employer pension in 2008, compared with 42.4 percent of men, according to the Women’s Institute for a Secure Retirement (WISER). In part, that’s because women have more diverse work patterns than men and that often means they lose the opportunity to participate in retirement savings plans — either they are working part-time or they don’t stay on the job long enough to qualify.

4. Financial illiteracy. It sounds like an unfair stereotype, but research by The Wharton School’s Boettner Center for Pensions and Retirement Research shows that women are less likely to understand the stock and bond markets and risk diversification than men are. The Center’s research also shows that low literacy levels leads women to under-invest in stocks and tax-favored assets, which leads to sub-par long-term returns.

“Traditionally, husbands paid the bills and balanced the check book, and women managed the household,” says Olivia Mitchell, a professor at the Center and a Wharton professor. “But with 50 percent of marriages ending in divorce, the specialization means that women end up single without any knowledge about where their money is or how it’s invested.”

5. Socialization and communication. “Women are not socialized from an early age to take ownership of their finances in the same way that men are,” says Manisha Thakor, a personal finance expert and author who focuses on women. “I say this as a feminist. When men are growing up, their conversations focus on deals and markets. Women talk about nurturing subjects.”

6. Women live longer than men. A woman who reaches the age of 65 can expect to live an average of 19 more years, three years longer than a man. That means whatever she’s saved for retirement must last longer.

How to Get on Track

Experts offer the following tips for building retirement security.

  • Get educated and make a plan. “Many women are missing an opportunity to learn the basic principles of saving and planning for retirement,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies.“By simply getting educated, they could make more informed decisions and improve their retirement outlook.”

    One approach is the old income-replacement rule of thumb — to retire comfortably, you must replace 80 percent of your annual pre-retirement income. But at best, this is a rough estimate. For example, it doesn’t take into account unforeseen needs such as higher health care expenses or a long term care insurance policy. Instead, construct a detailed plan that takes into account what you spend now and try to project your retirement needs. WISER recommends using the retirement planner offered by the American Institute of Certified Public Accountants; MoneyWatch has reviewed several other top calculators.

  • Focus on benefits. Look closely at retirement benefits when considering job offers, and even consider changing to a field that offers better packages. Asks Joan Kuriansky, WOW’s executive director: “Could you get some additional education that will put you on a good career path leading to benefits?”

    Industry groups that pay the richest retirement benefits include chemical and drug companies, energy, utilities, financial services and healthcare, according to a recent report from Towers Watson, an employee benefits consulting firm. The U.S. Department of Labor’s Bureau of Labor Statistics publishes a report showing access to benefits for occupations and industry groups in the private sector.

    In the public sector, the federal government is tops; retirement benefits include a 401(k) style plan and a defined benefit pension.

  • Start saving early. “The three most important words are ‘start saving now,’” says Thakor. “So many women put it off until it’s very late. If they abide by those three words in their thirties and forties, the power of compounding can make up for a fair amount of the headwinds they’ll face.” Cindy Hounsell, WISER’s director, says younger women “need to think about putting away the equivalent of 10 to 15 percent of salary annually for retirement, and they’re not doing that now.”
  • Shed debt. Since statistics suggests you will live well into your 80s, plan to make it a debt-free retirement if at all possible — focus particularly on credit card debt — to reduce expenses and boost available cash.
  • Retire later. Don’t underestimate the retirement boost you can get by working even a few years longer than you might have planned. Doing so means you will contribute more to your retirement savings accounts, increase your future Social Security benefits, and reduce the amount of time you’ll be drawing down savings.
  • Understand Social Security’s spousal and survivor benefits. Since women tend to earn less, check to see whether you’d be better off taking the spousal benefit; you’re entitled to receive whichever is larger: your own benefit or half of your spouse’s. Use the Social Security Administration’s retirement estimator calculator to see how much you will receive. One strategy that isn’t used very often — but is perfectly legal — is known as a file-and-suspend. Also, when a spouse dies, the survivor is entitled to receive the greater ofher own benefit or 100 percent of the spouse’s benefit, includingany cost-of-living increases earned along the way. Since men tend to be higher earners, this can be a powerful way for widows to increase retirement security — especially if the man has delayed filing for Social Security until the full retirement age or beyond.
  • Consider annuities. If you won’t have a defined benefit pension in retirement, consider converting a portion of your savings at retirement into a single premium income annuity, which gives you a guaranteed monthly check in return for a single upfront payment to an insurance company. This can be an excellent way to assure that you’ll be able to meet living expenses as long as you live. Married couples can purchase an annuity with a survivor benefit for a slightly higher premium.

Mark Miller is the author of The Hard Times Guide to Retirement Security. He writes the weekly syndicated newspaper column Retire Smart, contributes to The Huffington Post, and blogs at

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