Transcript Slide 1

Retirement Security:
Women Face Challenges in Ensuring
Financial Security in Retirement
A presentation for the
Women’s Institute for a Secure
Retirement
February 28, 2008
Barbara D. Bovbjerg
Director
Education, Workforce, and Income Security
GAO Report on Women and Retirement
Income
• How women’s retirement income compares with men’s and
the reasons for differences
• How certain life events such as divorce, widowhood, and
workforce interruptions affect women’s retirement income, as
compared with men’s
• The possible effect on women’s retirement income of certain
changes to Social Security and pensions that seek to mitigate
the effects of differences in workforce participation patterns
2
Men and Women Aged 65 and Over Are Increasing as a Percent
of the U.S. Population and Women are Increasing Faster
60,000
1
1
%
Number in thousands
50,000
12%
11%
11%
40,000
9%
9%
9%
9%
30,000
8%
7%
7%
20,000
5%
6%
10,000
0
2000
7
2020
5 %
%
Men aged 65 and over
2010
2030
2040
2050
Women aged 65 and over
Source: U.S. Census Bureau, Demographic Trends of the 20th Century.
Note: Percentage values over each bar show the total U.S. population represented by each bar.
3
Fewer Women than Men Have Income from Most Major
Retirement Sources
• Women’s median Social Security benefit is approximately 70
percent of the median benefit that men receive
• Fewer women than men have pension incomes, and the
median value of their pensions is about half that of men’s
• Among those in the paid labor force after age 65, women
earn just over half of what men earn
• Women earn somewhat less than men from assets such as
interest, dividends, rents and royalties
4
Men and Women Aged 65+ Varied in the Percent of Their Income
They Derived from Different Sources in 2004
Percent
100
90
80
70
60
50
40
30
20
10
0
Wages & Salary Social Security Pension Income
Women
Asset Income
Men
Source: Congressional Research Service analysis of the Census Bureau’s Current Population Survey data.
5
Women’s Median Annual Income at Age 65+ Was
Lower than Men’s from Every Income Source in 2004
Dollars
25,000
20,000
15,000
10,000
5,000
0
Wages & Salary Social Security
Women
Pension
Income
Asset Income
Men
Source: Congressional Research Service analysis of the Census Bureau’s Current Population Survey data.
6
Women Have Less Retirement Income than Men Due to
Differences in Labor Force Participation and Lifetime Earnings
• Women spend fewer years in the labor force than men and
they more often work part-time
• Women tend to earn less than men during their working
years (77 percent of what men earned for full-time, yearround work in 2005)
• Even after accounting for differences in work patterns and
behavioral differences, such as educational attainment,
women still earn less than men
7
Labor Force Participation Has Been Increasing
Labor force participation rate
90
80
70
60
50
40
30
20
10
0
1970
1975
Men 55-64
1980
1985
Men 65+
1990
1995
Women 55-64
2000
2005
Women 65+
Source: United States Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey,
http://www.bls.gov/data/home.htm.
8
Women’s Median Earnings For Full-time, Year-Round Work Have
Increased, But Are Still Less Than 100 Percent of Men’s Earnings
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
Women's Earnings as a Percentage of Men's
20
05
20
00
19
95
19
90
19
85
19
80
19
75
19
70
19
65
19
60
0%
Wage Gap
Source: U.S. Census Bureau.
Note: Based on median earnings of full-time, year-round workers 15 years old and over. Before 1989 earnings are for
9
civilian workers only.
Certain Life Events May Reduce Women’s Retirement
Resources More Than Men’s
• Divorce May Reduce Women’s Retirement Income
• Family Caregiving, Which Can Reduce Lifetime Earnings, Is
More Common for Women Than for Men
• Women are More Likely to Experience Widowhood, Which
Puts them at Risk of Poverty
• Health Care Costs May Deplete Elderly Women’s Retirement
Resources
10
Divorce May Reduce Women’s Retirement
Income
• Divorced women, as a group, experience more economic
loss than divorced men
• At retirement, Social Security divorced-spouse benefits are
available only if the marriage lasted at least 10 years
• Divorced spouses can, under certain circumstances, receive
all or part of their former spouses’ private pension benefits
11
Family Caregiving, Which Can Reduce Lifetime
Earnings, Is More Common for Women Than for Men
• In one study, almost half of women who worked during
pregnancy with their first child took unpaid leave, and onequarter quit their jobs
• Years spent out of the paid labor force can reduce a worker’s
pension and Social Security benefit amount
• Although many caregivers are employed, research shows
that caregivers can experience substantial losses in career
development and workforce earnings as well as significant
out-of-pocket expenses
12
Women’s Life Expectancy at Age 65 is Higher
Than Men’s and Is Projected to Remain So
Number of years
24
22
20
18
16
14
12
10
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Calendar Year
Male
Female
Note: The data for 2004 through 2006 are preliminary or estimated. The period life expectancy at a given age for a
given year represents the average number of years of life remaining if a group of persons at that age were to
experience the mortality rates for that year over the course of their remaining lives.
13
Poverty Rates among People Age 65 and Older Varied
Substantially by Marital Status in 2004
Percent
25
21.3
20
22.6
20.7
15.4
15
12.0
10.9
10
5
4.4
4.6
0
Married
Widowed
Women
Source: Social Security Administration.
Never married
Divorced
Men
14
Women are More Likely to Experience Widowhood,
Which Puts them at Risk of Poverty
• Because women tend to live longer than men they are more
likely to experience widowhood
• Social Security income is reduced at the household level
upon the death of a spouse, and widows do not often retain
all of their husbands’ pension benefits
• The shift from DB pension plans to DC pension plans has the
potential to provide even less income security for widows
who rely on a spouse’s pension income
15
Health Care Costs May Deplete Elderly
Women’s Retirement Resources
• In part because of their longer average life spans, with age,
women are more likely than men to become disabled and
need long-term care, further increasing demand upon their
retirement resources
• Nursing home entry has important financial consequences for
the elderly, especially for unmarried women
• Out-of-pocket medical costs during the last years of a
spouse’s life can deplete the couple’s resources substantially
and contribute to poverty among surviving spouses, who are
most often women
16
Summary Findings for “Retirement Security: Women Face Challenges in
Ensuring Financial Security in Retirement,” GAO-08-105
• In general, women have less retirement income than men, largely
because of women’s lower labor force attachment and lower
earnings, on average
• Certain life events—including changes in marital status, labor force
interruptions, and long-term care needs—can significantly reduce
the amount of pension income and Social Security benefits women
receive—and leave women with fewer financial resources at
retirement than men
• GAO’s simulations of some Social Security changes that would
compensate for low earnings or time out of the workforce showed
that those changes tend to increase benefits for beneficiaries
overall, and particularly those in lower income quintiles.
17
Summary Findings for “Retirement Security: Women Face Challenges in
Ensuring Financial Security in Retirement,” GAO-08-105
(continued)
• Changes that focus on shifts in family structure, such as
increases in two-earner couples and increased incidence of
divorce, tend to increase the benefits of groups targeted by
the change, but produce mixed results for others
• Some pension changes that have been proposed in the past
several years take into account the changing labor force and
norms of employer-provided retirement plans; while these
changes are gender-neutral, they may provide important new
opportunities for women to increase their retirement income
18
Contact Information
Barbara D. Bovbjerg
Director
Education, Workforce, and Income Security
(202) 512-7215
[email protected]
www.gao.gov
19