As we approach the end of the second week of Retirement USA’s “Wake Up, Washington!” Month” we have learned a great deal about the challenges women face in retirement. Women face special challenges because they make less than men and spend less time in the workforce. Yet they typically live longer than men, requiring more retirement income. As Retirement USA’s Facts of the Day have shown, women have far less retirement security than men. So what needs to happen to make sure women receive adequate income in retirement?
For one thing, we must close the gender gap in earnings during working years. Women make 77 cents for every dollar earned by men. As we’ve written in the past, the wage gap women face during their working years translates into a retirement income gap that women will face during retirement. Fortunately, organizations like the National Women’s Law Center and the American Association of American Women are urging Congress to pass the Paycheck Fairness Act. (More on this in a later blog post.)
According to the Congressional Research Service, women tend to spend less time in the workforce due to caregiving responsibilities. As such, they are more likely to rely on their spouse’s income both during their working years and during retirement. Therefore spousal protections are paramount in preserving retirement assets for women. Under current law, traditional pension plans typically pay benefits over the life of a worker in addition to a reduced survivor benefit for his surviving spouse. If a worker wants to take his benefit in another form, he must have his spouse’s consent.
Unfortunately, only 20 percent of private-sector workers work for companies that offer traditional pension plans to their employees. A larger number of private-sector workers participate in 401(k) plans but these plans do not contain the spousal protections that traditional pensions provide. Although a wife is protected if her husband dies while working, if he leaves the plan, there is nothing in the law that prevents a worker from liquidating his 401(k) account without his wife’s consent.
Implementing spousal protections in the current 401(k) system will help solve this problem. But this is just one fix of many that are needed. The private retirement system is broken and is failing too many people – especially women.