Speak for yourself, Heather.
Posted on 02/10/2005 3:35:11 PM PST by technochick99
Women live longer, earn less and fill more caretaking roles than men. For all these reasons they have a lot to lose if Social Security is changed, says economist Heather Boushey. So who would win? Wall Street brokers spring to her mind.
Editor's Note: The following is a commentary. The opinions expressed are those of the author and not necessarily the views of Women's eNews.
(WOMENSENEWS)--President Bush is talking about changing Social Security.
The word he bandies about is "reform," which harks back to progressive causes such as voting-rights reform. In those cases, to reform a system meant to change it to work more fairly for more people.
But this Bush-era reform is no way reformist in this sense. For women in particular, it could be a huge step backward.
Bush is pushing individual accounts, arguing that workers will benefit from investing in a broad mix of stocks and bonds. However, most employer-sponsored 401k plans allow workers to do just that. What most Americans no longer have is a pension that provides guaranteed, inflation-adjusted income during retirement--regardless of longevity. Social Security fills that gap.
If we move to a privatized system and it fails, it will be women who will have to pay the price. Not only do women depend disproportionately on Social Security, we are more likely than men to care for an aging parent. So without the insurance of inflation-adjusted lifetime income, more retirees could wind up relying on the time and generosity of their children. And that means more women would take on the added burden of elder care.
4 Percentage Point Plan
Bush has proposed allowing workers to invest up to 4 percentage points of their Social Security tax dollars in private retirement accounts. This money could be invested in broadly diversified stock and bond funds, much like the 401k plans that many Americans already have. Upon retirement, a worker could either draw down the account over time or convert the savings into an annuity or, in other words, a financial instrument that makes regular payments. For the duration of this annuity, it would pay a guaranteed income stream for the beneficiary and his or her surviving spouse (but not other dependents).
Workers will continue to have the remaining 2.2 percentage points of their Social Security tax dollars in the traditional Social Security plan, which provides inflation-adjusted benefits throughout retirement. The move to privatized accounts would be phased in only for those born after 1950, so today's retirees would see no changes under this reform.
On the upside, if a worker's portfolio earns more than 3.3 percent per year, he or she see would see higher benefits than those who left all their tax dollars in the traditional Social Security plan.
However, if returns are less, benefits will be comparable to those in the traditional plan. This might not sound so bad, until you keep in mind that the Bush administration is also expected to announce benefit cuts in addition to the private accounts. Regardless of whether an individual chooses a private account, once these proposed cuts are phased in over time, a worker who is 45 today would see a 15-percent cut in their future benefits, while those who are 35 today will see a 25 percent cut.
Women Have Much to Lose
Social Security, unlike private accounts, insures workers. As currently structured, it is designed to provide minimal income for retirees and income for people who become disabled and cannot work. (Supplemental Social Insurance addresses the needs of those who are disabled but have not worked.)
Women account for almost 60 percent of elderly Social Security beneficiaries and this guaranteed income allows them a decent standard of living.
Women continue to be more likely to stop working to care for a child or ill family member, which has implications for lifetime earnings. A recent study from the Institute for Women's Policy Research found that, over a 15-year span, women's earnings are 38 percent of men's. The causes are women's shorter employment histories, as well as women's lower wages when they work. Last year, full-time, full-year, women workers earned 75 cents on the dollar, compared to men.
Progressive Structure Helps Women
But even though women earn less from paid employment than men over a lifetime, the progressive structure of the current system--in which those with a lifetime of low earnings receive larger benefits relative to their contributions--benefits women. The system also provides disability insurance and dependent benefits. Thus, women relying on husbands for income are not destitute if something befalls him.
A privatized system does none of these things. Privatized accounts, unlike the benefits in Social Security, are based entirely on an individual's savings and returns. Therefore, while a mother is taking time off to care for a child, she (and her family) forgoes not only her earnings, but also on the ability to put funds into her privatized account.
Further, a privatized system would be riskier for women because they tend to live longer than men. Social Security provides guaranteed benefits to until death. A privatized system would pay benefits until the savings run out.
All of this raises a big question. If privatization is so risky, why do it?
The answer is that some proponents--Wall Street participants, in particular--will gain. Currently, administrative fees make up less than 0.5 percent of every dollar of Social Security benefits. Bush's Social Security commission estimated that the administrative costs of individual accounts would be about 10 times as high, much of which would go to brokers and Wall Street financiers. That's a lot more than what's being paid on Social Security and it could even be a low estimate. Just look at other nations that have moved to privatized plans: England and Chile have seen administrative costs as much as 30 times higher than our present system.
The bottom line: Bush's proposed plan entails risk and women have much too much to lose from it if it doesn't go according to the administration's optimistic scenarios.
Heather Boushey is an economist at the Center for Economic and Policy Research in Washington, D.C. She writes about the issues facing low-income workers and their families.
You have no right to demand that white women make arrangements for their own retirement.
Elderly white women have an absolute right to the dignity and independence guarenteed to them by having the government forcibly taking money from poor black men (who don't need retirement money, because, after all, they are going to die young anyway).
(/sarcasm)
Unless the economy gets into a prolonged funk, the sheer power of compounded interest over significantly longer ladies' life expectancy [assuming investment in a broad index fund] would make it impossible to lose.
Sexism Lives, I see...
/giggle
Excellent summation!
Hmm, Vanguard total market index or Vanguard 500 are sexist? I just used the accepted terminology, though. All claims to the authors of it.
Just kiddin' ya' on the use of 'broad' in a woman's issues thread!
Married women would be screwed the most. After all, after their husband dies and they get his private account they will really be out of luck!
Thanks for that excellant post...I heard this on one of the talk radio shows and now I have it in print! It really smashes the opposition.
I am sooo angry I paid intothis ridiculous plan for somany years.
Is that true? Do you loose credits if you stop contributing, or just stop accumulating them? I'm not familiar with how it works. Although, and don't take this the wrong way, but in the interest of fairness, why should you get something if you don't contribute? Again, not to disrespect stay at home moms. My wife is one.
Aren't private acounts better, given what this article states, because they can inherit their husbands account, rather than rely on survivor benefits at a reduced rate?
Want to talk about me, want to talk about I, want to talk about number one o-me, o-my what I want, what I like - what I need.
Hold on, every group will now be telling us why letting the government destroy our lives is more important.
Notice they did not say women are better at managing money then men so they can take care of themselves but only the government should do it. Course our wives tell us they are better then us men in this department.
This e-mail I am responding to is brought to you by a selfish and incapapable special interest.
Yes and as more and more choose the voluntary plan then wouldn't those people pay less in taxes? If you are putting money in a private account instead of paying it in taxes then libs would have to be angry,
This fits perfectly an "activists" definition of "reform". It certainly is not a rhetorically neutral definition.
This femenist dingbat, at least, defines the terms in her universe before proceeding.
Perhaps a more universal definition, however, is to change or to modify something so it doesn't crash and burn; so it can continue functioning at all.
Heather is obviously a poor economist. She neglected to mention that men who die prior to retirement leave no Social Security to their wives. With individual retirement accounts, the wife would inherit the savings.
Speak for yourself, Heather.
Well lets see women get better medical care all their life than men so they live longer and that is getting short changed. Maybe we men should demand the care it takes to live longer.
If privatization strikes you as risky, you will retain the option not to select it. When did these women cease to be pro-choice?
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