For women, securing the future means saving now
BY JOHN KERRY
For the first time since the Great Depression, America’s personal savings rate is negative: we are currently spending more than we are saving. This means that we are not saving enough for the present - let alone enough for the future. So it’s clear we are facing a retirement shortfall in America with dire consequences looming fast, and while the statistics are troubling for all of us, aging women face the most acute crisis.
Why will women face the brunt of this gathering storm?
Too often, women are not in a prime position to build financial defenses. Approximately 57 percent of Americans over the age of 65 are women, and in 2005, women 65 and older were almost as likely to be widowed as they were to be married. Only 29 percent receive income from a pension – men are twice as likely to do so.
We also need to take a hard look at the components of retirement income - particularly pensions and individual savings. Pensions play an integral role in retirement savings. In our rapidly-changing economy, pensions have undergone dramatic changes, shifting in recent years from defined benefit plans, to defined contribution plans. Employees can no longer rely on receiving a monthly benefit check based on their salary and years of service. Now, most employees participate in a defined contribution plan, which is similar to a personal savings account. An employer contributes to an account on behalf of an employee, often to match the employee’s own savings. Upon retirement, the employee can receive the entire amount in a lump sum or in a series of fixed payments.
The number of defined benefit plans continues to decline, as does the percentage of workers who receive an employer-sponsored contribution. Not only that, but there are 71 million employees who work for companies that do not offer pension plans at all, which means that only half of all Americans have been saving for retirement. In 2005, only 29 percent of workers from the smallest firms participated in pension plans.
These changes mean that people need to take a more active role in saving for retirement, but it doesn’t mean that employees should be asked to do it alone - employers and government still have a crucial role to play.
Because women face unique challenges for retirement, I have worked with my colleagues to introduce a bipartisan bill, the Women’s Retirement Security Act of 2006. It focuses on increasing retirement savings, preserving income into old age, equity in divorce, improving financial literacy, and encouraging small businesses to continue offering retirement plans. This proposal will help ensure that part-time workers don’t slip through the cracks, by including provisions for small businesses to realistically offer and maintain a pension plan for their employees, including part-time employees that meet certain minimum requirements. Offering automatic IRAs will provide a sensible, low-cost solution to help approximately 71 million workers without an employer-sponsored plan become more independent and enter their later years with confidence.
Congress needs to pass the Women’s Retirement Security Act now to stem the growing crisis, and offer practical incentives to help women achieve financial security in old age. We have a responsibility, now more than ever, to make sure that our mothers, wives, sisters, and daughters have the retirement they deserve.
John Kerry (D-Mass.) is U.S. Senator for Massachusetts.
WBJ Web Partners
Most Recent
Most Recent
0 Comments