Joan Staples invested her money well during the years she worked as a Chicago Public Schools teacher. Now that she is retired, she’s enjoying a comfortable income from her investments. Still, President George W. Bush’s proposals to privatize Social Security make her uneasy.
Staples, 74, who lives with her husband in Hyde Park, believes that a lot of women, no matter their lifelong saving habits, are going to need government help to make it through their later years.
Staples is not the only woman concerned about Bush’s proposed changes to Social Security. Because of several factors, women stand to be more deeply affected by any changes in the program than men, and that has women’s advocates worried. But experts disagree over the impact changes might have on women.
Women make up 60 percent of Social Security beneficiaries, according to U.S. Census Bureau data. Half of U.S. women 65 and older would be poor if not for Social Security. And, for 25 percent of elderly women who live alone, Social Security is their only source of income, the census bureau reported.
Gloria Gnatz, 79, is one of those women. Divorced, Gnatz lives alone in her South Side condominium. A retired drug abuse counselor, she receives $635 in monthly Social Security payments and has no other income. She pays $334 each month for her condo fees and utilities. That leaves about $300 for food, transportation and other expenses. Gnatz’s medical expenses–she is being treated for skin cancer–are covered by Medicaid, the federal health plan for low-income Americans.
“I live from month to month,” Gnatz says. “Any loss of benefits would be disastrous for me. I would not invest my Social Security in any of those private accounts because they’re too risky. They’re the stock market. I think Social Security should be more protected than that.”
Though Staples’ situation is not the same as Gnatz’s, Staples does worry that benefits will be cut under Bush’s plan to allow workers to divert some of their payroll taxes into personal retirement accounts.
Bush officially launched his effort to reform Social Security on Jan. 11 in a town-hall style meeting near the Capitol, in which he met with young workers who will one day “reap the benefits” of his plan, he said. He called for a new law amending Social Security that would permit workers to invest a portion of their payroll tax (FICA contributions) in “individually owned and directed personal retirement accounts.”
Bush has said the Social Security program will fall into crisis as 80 million Baby Boomers begin to retire at the end of this decade. The cost of retirement benefits is expected to rise much faster than payroll taxes from active workers, economists say. Americans are living longer, which puts more strain on younger workers, according to backers of the president’s proposed changes.
The Bush administration has argued that private retirement accounts will yield higher returns, enabling the federal government to spend less on Social Security benefits for retirees.
Potential advantage
But some economists say the effort to privatize Social Security could be good for women–particularly blue-collar workers and women of color.
Low-income workers, African-Americans and Hispanics, who generally have shorter life expectancies than higher paid white employees, sometimes don’t survive long enough to receive a return from their Social Security taxes, says economist Leanne Abdnor, who was appointed by Bush in 2001 to a commission that studied Social Security reform.
She offers the example of a 68-year-old woman who worked in low-paying jobs all of her adult life.
“Suppose she becomes ill and dies at 68,” says Abdnor, who is based in Boulder, Colo. “All of the money she contributed during her working years will not go to her children.”
Giving women the opportunity to divert 2 percent of their wages, part of the 6.2 percent of wages they pay now in Social Security taxes, would enable them to set aside money for retirement or to leave to their heirs, she says.
“Upper-income Americans are able to put away a nest egg and leave part of it to their kids,” Abdnor says. “The proposal to privatize Social Security would allow lower income workers to do the same.”
Abdnor stresses that personal income accounts would be voluntary. “Give women the choice of participating if they want to,” she says. “They want choice in other aspects of their lives, so give them a choice in managing their retirement funds as well.”
Some reform proposals would allow low-wage workers to invest a greater portion of their taxes than higher-paid employees, Abdnor says. “Personal accounts would increase the incentive to work by allowing a woman to” control a portion of her contributions, she says.
Abdnor acknowledges that the proposal has cash-flow problems. Under Bush’s proposed changes, young workers could start diverting some of their earnings to private accounts, reducing the Social Security trust fund, which has accumulated more than $1.5 trillion in reserves. To compensate for the shortfall that would occur, administration officials have proposed borrowing money, which would drive up the federal deficit.
Increasing the deficit is “bad public policy,” says Heidi Hartmann, an economist and president of the Institute for Women’s Policy Research in Washington.
Hartmann also pointed to the stock market’s volatility. “The market place is risky,” she says. “What if you’re unfortunate enough to retire when the markets are at a low point and you’ve put some of your money in private accounts, which don’t pay off?”
Hartmann also says the fees paid to managers who oversee private accounts would amount to “a windfall for Wall Street.” The fees would enrich stock fund managers instead of generating more money for the Social Security trust fund, she says.
Women could be particularly hard hit by Bush’s proposed reform plan because so many are dependent on their spouse’s benefits, Hartmann says.
“Many women work part time, or not at all, for periods of their lives, while they take care of children or older relatives,” she says. “Because they put less into Social Security over their working lives, they get less out when they retire, or they rely on their husband’s benefits more.”
Hartmann and Abdnor agree that Social Security should be reformed in ways that would help women. Under the present system, for instance, if a couple divorces before 10 years of marriage, an ex-wife cannot claim any of her former husband’s Social Security benefits.
Homemakers forfeit benefits
A woman who stays home to take care of young children is forfeiting her salary and Social Security benefits, Abdnor said. She should be able to “claim part of her husband’s benefits beginning from Day One of the marriage,” she says.
When a married woman retires, she can claim either 100 percent of her own benefits or 50 percent of her husband’s benefits, whichever is more.
“That means a woman doesn’t gain extra benefits for having worked,” Abdnor says. “She’s paid all those payroll taxes, but she doesn’t get them back if her husband made much more money than she did during the years they were working.”
As a member of the Older Women’s League, a nationwide advocacy group for women 40 and older, Staples is very familiar with the Social Security benefits issue. She worries about her financial security, even though she receives Social Security payments and has an Individual Retirement Account and a tax-sheltered annuity.
She and her husband, a retired social worker, don’t have children. “We can’t depend on somebody else to finance our old age,” she says.
Her mother lived to be 97 and her aunt was 100 when she died, so Staples expects to live a long time. “My husband and I took care of our elders, even while we were trying to save money for our own retirement,” she says. “If we hadn’t had Social Security to help us look after them, I don’t know what we would have done.”
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E-mail ctc-woman@tribune.com
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By the numbers
58% of all Social Security recipients at age 65 are women
71% of all Social Security recipients at age 85 are women
70% of older adults living in poverty are women
27% of women older than 65 rely on Social Security for 90 percent of their retirement income
28% of retired women receive pensions compared with 43 percent of retired men
$15,615 The average annual income of a retired woman in America
$29,175 The average annual income of a retired man
Sources: U.S Census Bureau, federal Bureau of Labor Statistics, Social Security Administration.
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Possible reforms
Reforms to Social Security under consideration by President Bush:
– No tax increases to cover future shortfalls in benefits.
– Voluntary personal retirement accounts for workers. Participants could invest in one of five large mutual funds, including one that contains only government bonds. Annual fees on the funds would be .3 percent of assets.
– Everyone now 55 or older will receive their benefits, as promised.
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AVERAGE MONTHLY SOCIAL SECURITY RETIREMENT BENEFIT IN 2001
WOMEN
$756
MEN
$985
Source: Social Security Administration
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From FDR to W: 70 years of change
JUNE 29, 1934
President Franklin Roosevelt establishes the federal Committee on Economic Security, giving it the responsibility to design a social security program in the U.S. The committe’s chairwoman is Secretary of Labor Frances Perkins.
AUG. 14, 1935
Roosevelt signs the Social Security Act into law.
JAN. 31, 1940
Ida May Fuller is the first person to receive a monthly benefit check under the new Social Security Act. Her first check comes to $22.54.
AUG. 13, 1945
“Social Security . . . is not a dole or a device for giving everybody something for nothing. True Social Security must consist of rights which are earned rights –guaranteed by the law of the land.”
— President Harry S. Truman
AUG. 28, 1950
Truman signs 1950 Social Security Amendments.
OCT. 30, 1972
President Richard Nixon signs the Social Security Amendments of 1972, creating the Supplemental Security Income program.
FEB. 9, 1976
“We must begin by insuring that the Social Security system is beyond challenge. [It is] a vital obligation each generation has to those who have worked hard and contributed to it all their lives.”
–President Gerald Ford
JUNE 9, 1980
President Jimmy Carter signs Social Security Amendments of 1980.
APRIL 20, 1983
President Ronald Reagan signs Social Security Amendments of 1983.
JAN. 31, 1990
“To every American out there on Social Security, to every American supporting that system today, and to everyone counting on it when they retire, we made a promise to you, and we are going to keep it.”
— President George H.W. Bush
JAN. 11, 2005
“So if you’re . . . in your mid-20s, and you’re beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now.”
— President George W. Bush
Source: Whitehouse.gov, Social Security Administration
