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Retirement Security: Older Women Remain at Risk

GAO-12-825T Published: Jul 25, 2012. Publicly Released: Jul 25, 2012.
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What GAO Found

Over the last decade, working women’s access to and participation in employer-sponsored retirement plans have improved relative to men. In fact, 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. Furthermore, as employers have continued to terminate their defined benefit plans and switch to defined contribution plans, the proportion of women who worked for employers that offered a defined contribution plan increased. Women’s higher rates of pension coverage may be due to the fact that they are more likely to work in the public and nonprofit sectors and industries that offer coverage, such as health and education.

Despite women’s greater likelihood of having an employer that offered a pension plan, they were slightly less likely to be eligible for and to participate in those plans. Although women’s eligibility rates generally increased over time, by 2009 there remained a 4 percentage point gap between men and women in terms of eligibility. Of those who were eligible to participate in their employer’s pension plan, women had lower rates of participation than men. This gap, however, diminished over time as men’s participation rates declined. Women who were eligible to participate in a defined contribution plan were less likely to participate for a variety of reasons, including that they made less money, on average, were more likely to work part-time, and were more likely to be single parents. Finally, women who participated in a defined contribution plan contributed to their plans at lower levels than men.

Women age 65 and over consistently had less retirement income on average and had higher rates of poverty when compared to men despite the fact that the composition of their income did not vary greatly over time. Specifically, the share of household income women received from earnings increased from 14 percent in 1998 to 16 percent in 2010, but was consistently lower than the share of household income men received from earnings. Moreover, women’s median income was approximately 25 percent lower than men’s over the last decade, and the poverty rate for women in this age group was nearly two times higher than men’s in 2010. Income levels and poverty rates did, however, vary by demographic group. Groups with the lowest median incomes and highest poverty rates included women who were not married, over the age of 80, and non-White. The composition of women’s income varied only slightly over time, in part, because their main sources of income—Social Security and defined benefit plans—were shielded from fluctuations in the market.

Divorce, the death of a spouse, and unemployment all had detrimental effects on the total household assets and income for men and women nearing or in retirement, and divorce and widowhood had more pronounced effects for women than for men. For example, after a divorce or separation, women’s household income fell by 41 percent, on average, almost twice the size of the decline that men experienced. As a result of becoming widowed, women’s household income fell by 37 percent while men’s only fell by 22 percent. These effects may help explain why elderly women have lower average incomes than men and are more likely to live in poverty. We also found, not surprisingly, that a decline in health after age 50 had a negative effect on household assets and income, for both men and women.

Experts we interviewed identified 22 existing policy options that could address some of the challenges women face in attaining a secure retirement and help decrease the risk of elderly women living in poverty. These policies can be categorized into six broad policy goals. For example, one set of options would expand the use of existing tax incentives, such as the automatic IRA, to encourage women to save more for retirement during their working years. Another set of options would help ensure income adequacy in retirement by, for example, providing an additional Social Security benefit to beneficiaries over the age of 80 or 85. All of these options could benefit men as well. At the same time, however, all of the options have cost implications that would need to be considered before they are implemented. For example, as with any federal spending program, any option that results in reduced or deferred federal tax revenue may require an offset, such as raising revenue elsewhere or cutting spending. While the federal government could bear some of these costs, workers and plan sponsors could be responsible for others. Lastly, some options may require legislative changes.

In conclusion, retirement security continues to be a national dilemma for both women and men. Recent economic volatility, coupled with the continued shift toward defined contribution plans, exposes all workers to more financial risk than in previous generations. Our work highlights, however, that women face a unique set of circumstances that warrant special attention. Women may have a more difficult time saving for retirement and avoiding poverty late in life, partly due to the fact that they have a greater likelihood of being single, living longer, taking time out of the workforce to care for family members, and having lower average earnings when they are in the workforce. Further, our findings show that for recent generations of older women, late-in-life events, such as widowhood and divorce, can have devastating effects on women’s income and asset levels. According to the experts we consulted, many options exist for addressing the challenges women face, ranging from changes to Social Security to altering the pension system. While each option would require trade-offs and difficult choices, they could benefit both women and men and ultimately provide opportunities to improve the retirement security of many Americans.

Why GAO Did This Study

This testimony discusses the challenges women face in attaining a secure retirement. Historically, elderly women have been at greater risk than men of living in poverty for several reasons. As our previous work has shown, women continue to have lower average earnings than men, despite their increasing participation in the labor force over the last half of the 20th century. They are also more likely than men to take time out of the workforce to care for family members and tend to live longer. Moreover, recent economic trends, including the economic downturn, reductions in public sector pensions, and the ongoing shift from a defined benefit pension system to a defined contribution system could exacerbate the risks women face in attaining a secure retirement.

Over the past quarter-century, the percentage of private sector workers participating in employer-sponsored pension plans has held steady at about 50 percent. The majority of workers that do not participate in an employer plan lack access to one. In addition, over the last 3 decades, the U.S. retirement system has undergone a major transition from one based primarily on defined benefit plans to one based on defined contribution plans. This transition, in turn, generally shifted the burden of saving and decision-making to the individual worker and also increased workers’ exposure to economic volatility. This transition also has implications for the financial security of spouses. For instance, under defined benefit plans, the qualified joint and survivor annuity required by law may only be waived through a written spousal consent. However, under most defined contribution plans, an employee may withdraw funds from his or her account without spousal consent.

This testimony examines women’s retirement income security in light of these circumstances. It is based on a GAO report being released today. In the report, we examined (1) how women’s access to and participation in employer-sponsored retirement plans compare to men’s and how they have changed over time; (2) how women’s retirement income compares to men’s and how the composition of their income—the proportion of income coming from different sources—changed with economic conditions and trends in pension design; (3) how later-in-life events affect women’s retirement income security; and (4) what policy options are available to help increase women’s retirement income security.

For more information, contact Barbara D. Bovbjerg at (202) 512-5491 or

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