The challenges of retirement security for women

Older women are almost twice as likely to live in poverty than older men, says Cindy Hounsell, President of the Women’s Institute for a Secure Retirement (WISER)

Older women are almost twice as likely to live in poverty than men. Image credit: iStockphoto by Getty

In 2012, the median annual income of older women was less than 60 percent of the median annual income for men the same age – $15,323 versus $27,657. Older women are almost twice as likely as men to live in poverty, and among women of color, more than 1 in 5 live below the poverty line. Moreover, more than half of women work in jobs without access to an employer-sponsored retirement plan, such as a 401(k).

The Washington-based Women’s Institute for a Secure Retirement (WISER) is the nation’s leading organization advocating for the retirement security women. President Cindy Hounsell has been recognized by Money magazine as one of five national “champions of financial education,” and WISER’s website was named by ForbesWoman as one of the Top 100 Websites for Women.

R3.0: What are the particular challenges of retirement security for women?

Hounsell: Women live longer, that’s the biggest issue. Many women also don’t earn a lot of money throughout their lifetime, and they focus on their family’s needs before their own financial needs. They’re not prepared for what lies ahead.

Women also end up living alone, whereas men are more likely to spend their lives as a couple, which means more money in Social Security benefits and two pensions. Almost 70 percent of women over age 85 are alone. That’s huge because you don’t have that extra income to help make ends meet.

R3.0: Are women also more likely to be victims of financial fraud?

Hounsell: [Among] victims of fraud who are in their 50s, it’s actually more likely to be white males.  They get caught up in scams – the great piece of land, the greatest investment or whatever the hot deal is. When you talk about scams among the elderly age 70 up, it’s much more likely to be women.

R3.0: How are women’s investment styles different from that of men?

Hounsell:  There’s a seminal study that showed that even though women are more conservative, they end up doing better because they’re not paying a lot in fees, especially in 401(k)s. Men will pay more fees because they keep switching [investments] – we call it the “remote control factor.” So they don’t come out any better – the women come out better.

R3.0: Are women as likely to get the help they need or ask for help in making investment decisions?

Hounsell: Women are more likely to [ask for help] but it’s harder for them to find planners. Women make up only 30 percent of people in the financial industry, and there’s a move within the industry to get more younger women.

There’s also a lot of training going on to get male advisors to look at a couple and talk to each of them, not just pointing all of it toward the male half of the couple. The financial planners tell this joke where they ask a group of advisors, “How many female clients do you have”? and hardly anybody raises their hand. But then they ask, “How many of you see couples?” and they all raise their hands. It’s like the woman in the couple is invisible.

R3.0: Are there federal policy obstacles that stand in the way of women being better prepared for retirement?

Hounsell: A little less than half the workforce has no retirement [benefit] access at their job, and all the research shows that everyone uses the payroll system really well. If your employer offers it, you will have it taken out of their pay and save.

But if you don’t have access to that, you have to go out and open up something on your own, and that’s difficult. You need a lot of information and time, and that’s why a lot of people just give it up. Everybody needs something at their job.

R3.0: What is your organization doing to fill the need?

Hounsell:  We advocate for policies that would help women get more access [to retirement benefits]. We have a couple projects that show that even low-income women want to save and want the opportunity to save.

We run a national resource center on women and retirement planning, and we partner with a lot of nonprofit organizations that work with the women we’re trying to reach.

What we’re trying to do is have fewer women living in poverty and get the younger generation to pay attention to these issues. I see a lot of millennials who are not doing what they need to do, and it’s probably because they have school loans, which takes up a big part of their paycheck. They’re also maybe not making as much money because they’re younger or they’re thinking about getting married and having kids. Retirement isn’t their top issue.

R3.0: Is it realistic to wish for the days of the defined benefit pension to return?

Hounsell: I happen to be one of the best examples of somebody who had a defined benefit plan – I was at a company for 17 years – and the benefit got frozen. For over 30 years, my benefit was frozen, and I couldn’t get to the money. That didn’t work out so well for me.

It’s luck in many ways whether the system works out for you. That’s why Social Security is so important. Most people have access to it, it’s guaranteed, and I think taxpayers are going to ensure the system continues.

R3.0: Knowing what you do about the percentage of people who aren’t ready for retirement, what’s the worst-case scenario we should all be working to avert?

Hounsell: What I worry about is that there will be a lot of older women who don’t really understand the consequences of what will happen, and there will be cuts in benefits.

One of the policy solutions people were gravitating toward was a different way to calculate the cost of living adjustment [in Social Security]. I can see why people would want to do this, but for the population that’s older, they have the least bit of money. It shouldn’t apply to them. The older you get, the more you’re going to be penalized, even though you have the least amount of money. It just doesn’t make sense.

R3.0: What is the single biggest mistake that you’ve seen women make in planning for retirement?

Hounsell:  Not starting. And not starting early enough.