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Jewish World Review July 19, 2001 / 28 Tamuz, 5761

Betsy Hart

Betsy Hart
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Consumer Reports

For women, Social Security is bad deal -- ELDERLY women are twice as likely to be poor as elderly men. This had held true for years, regardless of the poverty rate itself, and it may be the ultimate evidence of a "gender gap." But what may be most surprising is that one of its key underlying causes is our once-vaunted Social Security system.

That's the provocative finding of a new booklet on "Women and Retirement," one of an educational series offered by the Independent Women's Forum in Washington, D.C. on "What Women Need to Know About Work and Money."

Today college educated women in their 20s and 30s who've never had a child earn 98 percent of what their male colleagues with similar backgrounds earn.

But women are far more likely than men to choose to limit or forgo career advancement to care for a family and children. Though these are choices freely made, it means that over a lifetime women will typically earn less than men. And while the rules used to determine Social Security benefits are the same for both sexes, they are tied to earnings and years spent in the workforce - so she ends up with lower benefits.

This wouldn't have to affect a woman's retirement security except for the fact that a person does not own his Social Security "fund;" it belongs to the government. So while most women know they are far more likely to outlive their husbands than vice versa - and typically he would have been the top earner - what many women don't realize until it's too late is that a new widow routinely has her Social Security payments cut by as much as half.

That's because, unlike private savings plans which typically go to the wife upon her husband's death, Uncle Sam is in control of the couple's Social Security "accounts" and he says a widow only needs about half the benefits the couple formerly received. (Nor is there any inheritable benefit to pass on to heirs once she dies.) That hits hard because most women depend heavily on Social Security for their retirement.

It's particularly galling when one considers how much we pay into the system - whether it's his or hers, it's 12.4 percent of each paycheck. That's because the worker and employer each pay 6.2 percent. But if anyone thinks his boss is really picking up half the tab, forget it - the employer is reducing wages by some or all of the amount he has to pay in Social Security taxes.

Yet even these problems are dwarfed by the fact the program is facing a financial crisis. There is no Social Security "trust fund," and when the huge baby boom generation begins drawing its benefits in a few years, the only way to support them will be with dramatically decreased payments or significantly higher taxes on younger generations of workers.

So women, particularly vulnerable to the vagaries of our Social Security system, should be in the forefront of those seeking its reform. In fact, for a host of reasons the case to do so has finally become a compelling one with policy makers in Washington, which would have been unthinkable just a few years ago. But now various proposals are on the table, and they generally involve allowing workers to stay in the current system or to start investing a portion of their payroll taxes themselves into 401K type plans called personal savings accounts - which they would truly own.

(And yes, we could transition to a more private system while preserving benefits for retirees - just as countries like Chile, England and even Sweden have done.)

The Women's Forum estimates that under such an approach, a typical worker born in 1970 could increase his or her retirement benefits from $1,429 a month to some $3,636 per month. Further, men and women could contribute to savings accounts regardless of their employment status. Not only would there be far more of a nest egg in a savings account than in Social Security benefits, but the accounts would typically be bequeathed at the time of death to the spouse and finally to heirs. Another plus - they would become dividable assets at the time of divorce, which is not the case with Social Security benefits until a couple has been married at least ten years.

All of this would particularly benefit women.

Unfortunately women's groups are either silent about, or they more typically oppose, social security reform. Which does make me wonder - just where is The Sisterhood when women really need it?

JWR contributor Betsy Hart, a frequent commentator on CNN and the Fox News Channel, can be reached by clicking here.


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© 2001, Scripps Howard News Service