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Keep Savin’ It, Sister: GAO Says Women Saving More, but Need Social Security More Than Men

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American women may think they’re good at penny-pinching, but it turns out that they’ll need to save even more if they want to feel secure in retirement.

Women, especially widows and those age 80 and over, depend on Social Security benefits more than men, the latest U.S. government study on women in retirement shows, but they’re also doing a better job of contributing to their employer-sponsored retirement plans.

In 2010, 16% of women age 65 and over depended solely on Social Security for income compared with 12% of men, according to the U.S. Government Accountability Office’s July 25 report to the Senate’s Special Committee on Aging. At the same time, the share of household income women received from earnings increased over the period, but it was consistently lower than for men.

Worse, women’s median income was approximately 25% 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.

“Moreover, divorce and widowhood had more pronounced effects for women than for men,” the GAO reported. “For example, women’s household income, on average, fell by 41% with divorce, almost twice the size of the decline that men experienced. For widowhood, women’s household income fell by 37% — while men’s declined by only 22%.”

A Bright Spot: 401(k)s

But a bright spot in the report is the finding that working women’s participation in employer-sponsored retirement plans such as 401(k)s has improved relative to men.

“Indeed, 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,” the GAO said.

Women’s participation rates in defined-contribution plans increased slightly over that period as men’s participation fell, thus narrowing the participation difference between men and women to just one percentage point. At the same time, however, women contributed to their DC plans at lower levels than men.

“Specifically, the participation rate for women in any type of plan, defined benefit or defined contribution, declined slightly from 87% in 1998 to 86% in 2009, while the participation rate for men declined from 91% to 87%,” according to the full GAO report.

The study’s findings were brought before the Senate’s Special Committee on Aging on July 25, according to Bloomberg. The hearing’s discussion focused on improving the Social Security Administration’s efforts to tell retirees about the advantages of waiting longer before claiming benefits.

“SSA has a responsibility to educate people about their options, and it needs to make sure people understand just how much money they are losing when they take their benefits sooner rather than later,” Bloomberg reported Sen. Herb Kohl, D-Wis., as saying. Kohl led the hearing. Existing policy options could help solve the income problems that women face in retirement, according to the GAO. Some policies could, for example, expand existing tax incentives to save for retirement, while others would improve access to annuities.

“All of these options have advantages and disadvantages that would need to be evaluated prior to implementation,” the GAO said. “For example, increasing Social Security benefits for widows could provide additional income for women who have few options to increase their retirement savings. However, increasing benefits would also increase costs to the Social Security program and have implications for its long-term solvency.”

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