Retirement Income for Women in U.S. Retirement Plans

February. 25,2021
Retirement Income for Women in U.S. Retirement Plans

Social Security Benefit (SSB) is an important source of income for many women in their retirement years. Because women's socio-economic status and work environment are so different from men's, they face greater challenges with Social Security benefits than men. The impact on women's retirement is even more pronounced in the U.S. Social Security program, where the outlook is not promising.

In the early years of Social Security (1950s and 1960s), women received more favorable benefits than men, and in 1983, a series of legal changes eliminated the gender disparity in Social Security benefits and women lost their former preferences. This seemingly gender-neutral change resulted in a significant disadvantage for women. Social Security benefits are based on the number of years people have worked. Men and women have different lengths of service, and men tend to work longer than women. Although many women are currently working, they have, on average, fewer years of service than men due to the demands of having children or caring for other family members. In addition, Social Security benefits are related to income. Men tend to earn more than women in the same work environment. This results in women earning less Social Security benefits than men after retirement. For women who do not work, they are dependent on their husbands for Social Security benefits and receive only 50% of their husbands' benefits. If the husband dies and the wife is raising minor children, she receives only 75 percent of the husband's benefits (100 percent if she does not have to raise the children). The most difficult situation is when the husband dies, the wife is under 60, and the children are over 16, and the wife receives no Social Security benefits. This period of time is called the "Black-out Period".

At this point, the future of Social Security benefits looks very bleak. It is estimated that in the near future there will be a financial crisis in which the Social Security program will not be able to make ends meet. As the baby boomers, who have begun to reach retirement age, this crisis will get worse and worse, and Social Security will only be able to pay up to 75% of its benefits by 2032, or even go bankrupt. Congress is currently considering different options to save the Social Security benefit program. And many of the proposals being considered would be even more disadvantageous to women. For example, one of the proposals is to increase the number of years of service in the benefit calculation from the current 35 years to 40 years, which is actually a disguised reduction in benefits. This would have a greater impact on women than on men. Another proposal is to reduce the spouse's benefit from the current 50% to 33%. Since women depend on their spouse for higher Social Security benefits than men, this would have a significant negative impact on women's retirement income.

In terms of retirement planning, women are at greater risk because they live longer than men and, on average, more than six years longer than their spouses. A healthy 65-year-old woman has a 50 percent chance of living to age 88 and a 25 percent chance of living to age 94. Also, because men have a higher tolerance for risk than women, they tend to choose riskier investments, whereas most women follow the choices of their male partners and accept the consequences, exposing themselves to higher risk. Then again, women usually have more family and social responsibilities. They are wives, mothers, daughters, and daughters-in-law. The older the parent, the younger the child. When someone in the family needs care, the burden usually falls on the woman. And they themselves are often suffering from illnesses due to chronic fatigue. Therefore, women need a more secure and stable income to provide for their retirement.

So, how can women plan for retirement?

The first step is to plan early. When choosing a job, make a retirement plan a priority, and you may even be able to choose a slightly lower salary in exchange for a good retirement plan, such as a 401(k) with a full matching employer pension plan. Since Social Security benefits are tied to years of service, women should stay in the workforce as long as possible. If they have worked more than 10 years, their Social Security benefits will provide Medicare care after they retire. In addition, women should save regularly, even if it's only $10 or $20 a week. if they can invest $20 a week in a retirement account, they will have $92,000 in savings from age 40 to 65, and if they start at age 25, they will have $370,000 in savings by the time they retire at 65.

Second, insurance is a financial tool to protect women's retirement income from being eroded by unforeseen events. There are many things in our lives that we can do wrong and still have a chance to fix. But there are no second chances for certain financial decision making mistakes. An unintentional oversight, albeit an unintentional one, may result in a lifetime of regret. When someone we love is tragically gone, the value of family remains. But for many people, the untimely death of one person can shatter the dreams of an entire family. These dreams may include a college education for their children, a future source of income, family vacations, their own retirement, and much more. Life insurance can provide financial security and psychological comfort to families who have lost a loved one. It is estimated that insurance companies provide nearly $60 billion in compensation to insurance beneficiaries each year, providing tremendous financial relief and emotional comfort to families who have lost a loved one. An overwhelming majority of Americans recognize the importance of life insurance to a family, and recent surveys show that 86% of people believe that almost everyone needs proper protection. Unfortunately, however, far too many American families do not have adequate protection.

Nearly 95 million U.S. adults do not have any life insurance (approximately 40% of U.S. adults). Only 35 percent of adults have individual life insurance, and many rely on group life insurance provided by their employers. These individuals are likely to lose protection if they lose their jobs or change jobs. In addition, individual and employer-sponsored life insurance declines over the years. For those who do have insurance, the amount of coverage averages only three times their annual income. Many insurance experts agree that the total amount of coverage should be about 10 times the annual income. Every year, 600,000 people die prematurely in the United States. Statistically, a 25-year-old man has a 20% chance of dying before age 65, and a woman has an 11% chance of dying before age 65. When a person dies prematurely, 75% of families without adequate life insurance have to take difficult actions such as finding a second job or working longer hours, borrowing money, withdrawing money from retirement accounts, or moving to a smaller, cheaper home. Seeing these troubling statistics forces us to rethink the necessity of having adequate insurance. Especially during a time when the economy is in a recession, unemployment is high, and many families are struggling, financial protection is more important than ever because most families have significantly fewer financial resources than in the past and are more vulnerable to unexpected events. Are American women currently adequately protected? With the increase in insurance products, life insurance may be cheaper than you think.

If you are a stay-at-home mom, you should consider buying life insurance and long-term care insurance for your family so that if something happens to your spouse, the insurance proceeds can be used to compensate for the loss of income and so that you don't have to worry about being left alone to take care of your spouse in the event of an accident.