Women Face Retirement Security Challenges

July 26, 2012 (PLANSPONSOR.com) - Over the last decade, working women’s access to and participation in employer-sponsored retirement plans have improved relative to men’s, but they still face retirement security challenges.

The Government Accountability Office (GAO) found from 1998 to 2009, women surpassed men in their likelihood of working for an employer that offered a pension plan, largely because the proportion of men covered by a plan declined. As employers have continued to terminate their defined benefit (DB) plans and have switched to defined contribution (DC) plans, the number of women who worked for employers that offered a DC plan increased.

Correspondingly, women’s participation rates in DC plans rose slightly over this same period, while men’s fell,  narrowing the participation difference between genders to one percentage point.

However, women contributed to their DC plans at lower levels than men. They also continued to have less retirement income on average and live in higher rates of poverty than men in their age group.

The composition of women’s income varied only slightly, in part, because their main income sources—Social Security and DB benefits—were shielded from fluctuations in the market. Women, especially widows and those age 80 and older, depended on Social Security benefits for a larger percentage of their income than men.

In 2010, 16% of women age 65 and over depended solely on Social Security for income compared with 12% of men. At the same time, the share of household income women received from earnings increased over the period, but was consistently lower than for men. Moreover, women’s median income was approximately 25% lower than men’s over the last decade, and in 2010, the poverty rate for women in this age group was nearly two times higher than for men.

Women’s household income, on average, fell by 4% with divorce, almost twice the size of decline that men experienced. For widowhood, women’s household income fell by 37%—while men’s declined by only 22%. Unemployment also had a detrimental effect on income security, though the effects were similar for women and men; household assets and income fell 7% to 9%

Policy options that address the income security challenges women face in retirement could include expanding existing tax incentives to save for retirement or improving access to annuities.

Increasing Social Security benefits for widows could provide additional income for women who have few options to increase their retirement savings, but would also increase costs to the Social Security program and have implications for its long-term solvency.